Corporate Governance in Taiwan

Securities and Futures Institute May, 2007

Table of Content

1 Preface 1

2 Concept of Corporate Governance 1

2.1 Definition 1 2.2 Extent 2 2.3 Significance 2

3 Framework of Corporate Governance in Taiwan 3

3.1 Regulatory Scheme 3 3.2 Regulatory Device 3 3.3 Characteristics of Corporate Governance in Taiwan 3 3.3.1 Taiwan’s Market Features 3 3.3.2 Trend of Separating Ownership and Control 5 3.3.3 Environment of Group Operation 5 3.3.4 Cross Shareholding Scenario 6 3.3.5 Development of Foreign Investment 7 3.3.6 Passive Role Play of Institutional Investor 7 3.4 Present Issue of Corporate Governance in Taiwan 9

4 Implementation of Corporation Governance 9

4.1 Board of Directors 9 4.1.1 Composition 9 4.1.2 Duties and Responsibilities 12 4.1.3 Mechanisms for Controlling Board 13 4.1.4 Database for Independent Members 14 4.1.5 Disclosure of Share Transactions by Directors and 14 Controlling Shareholders 4.2 Supervisors and Audit Committee 16 4.2.1 Supervisors System 16 4.2.2 Audit Committee 19 4.3 Meeting of Shareholders 19 4.3.1 Shareholder Participation 20 4.3.2 Proxy Solicitation 22 4.3.3 Facilitate the Exercising of Shareholders’ Right 23 4.3.4 Operation Mechanism of Shareholders’ Meeting 23 4.4 Information Disclosure and Transparency 24 4.4.1 Dissemination of the Primary Market Information 24 4.4.2 Disclosure of the Secondary Market Information 25 4.4.3 Corporate Governance Disclosure in Annual Report 26 4.4.4 Disclosure of Affiliated Corporations 28 4.4.5 Public Disclosure System 29 4.4.6 Information Disclosure Rating System 29 4.4.7 Corporate Governance Framework Assessment 30 System 4.5 Disgorgement against Insider’s Short-Swing Profit 30

5 The Role of FSC in Corporate Governance 31

5.1 No Cross-shareholding among Affiliated Corporations 31 5.2 Improving Transparency 32 5.2.1 Earlier Announcement of Annual Financial Reports 32 5.2.2 Amending the Regulations of Financial Forecasts 32 5.2.3 Information Disclosure Regarding Employee Bonuses 33 5.2.4 Disclosure of Stakes above 5% 33 5.2.5 Integrated Public Disclosure System 33 5.3 Improving Accounting System of Public Companies 34 5.3.1 CPAs’ due Diligence Responsibility 34 5.3.2 Set Aside Losses on Sale of Non-Performing Loans as 35 Special Reserve 5.3.3 Accounting Principle of Employee Stock Option Plan 35 5.4 Improve Administrative Procedure of Tender Offer 35 5.5 Introducing More Institutional Investors to Engage the 36 Corporate Governance 5.6 Orientations and Training of Directors and Supervisors 36 5.7 Enhancing Internal Control and Audit Systems of Public 37 Companies 5.8 Encourage Companies to Implement Corporate Governance 37 5.9 Enact “Securities Investors and Futures Traders Protection 38 Law” 5.10 The Investigation and Enforcement Power of Securities 39 Authority

Appendix I Information Disclosure and Filing Requirements for Public Companies

Appendix II List of Short-Swing Profit Disgorgement Against Insiders 1 Preface

The concept, corporate governance, has been emerging since the early 1970’s in response to the perceived lack of effective board oversight that contributed to the poor performance problems. In 1997 there were numbers of scandals and corruption within Asian financial markets that led to severe Asian financial crises. Inadequate corporate governance system has been concluded the major reason suffering the serious consequences on the Asian financial crises. The impact arising from Enron and Corporate America has now put the issue under a spotlight. Therefore, the attention to enhance corporate governance is being emphasized hence after. Furthermore, OECD, in its ministerial meeting as of 1998, also pointed out the lack of corporate governance has been one of the root causes of the recent Asian financial crisis. The Asian financial crises provide lessons for Taiwan to esteem the importance of corporate governance. Knowing that inadequate corporate governance is identified as the key fact that Asian corporations could not build the competition in world financial markets, Taiwan securities regulator (Financial Supervisory Commission, or FSC) has tried its best to emphasize the importance of advocating corporate governance to public companies since 1998. It believes that greater transparency as to corporate governance is needed for enterprises to control risk. Securities and Futures Institute (SFI), founded as a quasi-public organization for research, training and protecting investors, together with Taiwan Stock Exchange (TSE), Taiwan’s computerized over-the-counter market (known as GreTai Securities Market, GTSM), and Corporate Governance Association（CGA）, introduce the system of independent directors, audit committee, etc. They also established and promoted “Corporate Governance Best-Practice Principles for TSEC/GTSM Listed Companies” in Taiwan (detail contained on the website: http://eng.selaw.com.tw /FLAWDAT01.asp?LSID=FL020553). To strengthen the legal base in the field of corporate governance, Taiwan amended Company Law and Securities & Exchange Act. In the future, all said organizations will be continue to put their efforts in helping corporations by adopting best practice as infrastructure tools of corporate governance.

2.Concept of Corporate Governance

2.1 Definition

Corporate governance can be defined in several ways. Legal academics may view corporate governance as a vehicle of decision-making and power allocation among shareholders, managers and directors. Financial economists limit their attention on persuading or forcing companies to maximize shareholder value and stakeholders rewards as well. From the financial point of view, a fundamental concern of corporate governance is to ensure the means by which a firm’s managers are held accountable to capital providers for responsibility of managing assets efficiently. Experts of the OECD have defined corporate governance as the system by which business corporations are directed and controlled. According to them the corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the Board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it provides the structure through which the company objectives are set, and also provides the means of attaining those objectives and monitoring performance. Generally, corporate governance refers the structure and processes by which the company are directed and managed and the accountability of management is stressed, in order to protect shareholders’ interest through enhancing corporate performance while taking into account the interests of other stakeholders.

2.2 Extent One may define the extent of corporate governance either narrowly or broadly. In a narrow sense, only managers, board directors, and shareholders are to be referred, however, it may include the “stakeholders” (i.e., customers, employees, creditors, and business associates) in a board sense.

2.3 Significance

The issue of corporate governance is currently inviting a widespread discussion in Taiwan. Partly reflects the issue of the major topic in the global financial market, partly refers to the importance for individual corporations to raise capital and to achieve sustainable growth. Good corporate governance means interacting between shareholders and the market in a timely and transparent manner, monitoring of directors business conduct, establishing guidelines for Board, holding regular Board meetings, and setting remuneration levels of directors and key staffs. The benefits with establishing good corporate governance facilitate greater access to international capital markets and help enterprises to gain a higher premium while seeking outsiders’ investments. It is important for corporations to be successful in economic performance and to attract a long-term, stable, and low-cost investment. Briefly, sound corporate governance is the key element to culture the long- term development of enterprises. Corporation with poor governance will severely affect investor confidence and incur the negative operation. It stands true as to the firm of publicly traded, or privately held, including family-control. As a result, corporation governance is now becoming an urgent need for countries and enterprises. Considering Taiwan’s entrance into the World Trade Organization, it is even demanding for Taiwan to adopt good corporate governance for catching up international practical standards and face the challenge of global markets.

3. Framework of Corporate Governance in Taiwan

3.1 Regulatory Scheme

The legal basis of corporate governance in Taiwan primarily arises from the application of Company Law (the full text can be read online at: http://www.moea.gov.tw/%7Edoc/law/), Securities & Exchange Act (hereinafter the Securities Law, the full text is available at: http://www.selaw.com.tw), and their related rules and regulations. The Company Law particularly binds rules to protect present and future shareholders and creditors. The Securities Law enhances the regulation of disclosure and transparency toward listed companies.

3.2 Regulatory Device

The basic regulatory model of corporation in Taiwan is a two-tier structure that consists of Board of director, Supervisor(s) and shareholders. Shareholders, as owners of the corporation, elect directors and supervisor(s) by Shareholder’s Meeting. The Board, holds discretionary powers from the delegation of shareholders, also performs the functions of management. Shareholders retain the power to reshuffle the director who abuses the delegate discretionary power that meant to maximize the shareholders interest. Supervisor monitors improprieties directors, also audit managerial execution of business activities.

The Amendment of Securities & Exchange Act on January 11, 2006 was made to the whereby an audit committee system was introduced as an alternative to the current statutory Supervisor.

3.3 Characteristics of Corporate Governance in Taiwan 3.3.1 Taiwan’s Market Features

Taiwan government had set up a securities regulator (SFC) and a stock exchange (TSE) in the early 1960s. The Securities Law was enacted in 1968. In line with the internationalization and liberalization of the securities market, the SFC has been directed to set up a specialized institute （known now as Securities and Futures Institute, SFI） to plan, design, and promote market related activities in 1984. A computerized over-the-counter (GTSM) was established in the early 1990s. In addition, the second board（known now as Emerging Market）was set up in 2002 to offer growing enterprises an avenue to raise capital.

In order to achieve the goal of consolidating financial supervision, the “Financial Supervisory Commission, Executive Yuan” (“FSC”, or Authority) was then be set up on July 1, 2004. Under the “Organic Act of Financial Supervisory Commission, Executive Yuan”, the FSC shall have nine commissioners, including one chairperson and two vice chairpersons. All commissioners are nominated by the Premier and appointed with the consent of the President. Under the FSC, they are 4 Bureaus: Bureau of Monetary Affairs, Securities and Futures Bureau, Insurance Bureau, and Examination Bureau. With the protection of tenure of office, the framing and promotion of the related policies will be more complete, and the future exercise of governmental authority will be more impartial and detached.

In addition, all commissioners are required to have professional education and experiences. The number of commissioners belonging to the same political party shall not exceed 1/3 of the total commissioners. All commissioners shall be non-partisan and shall not participate in the activities of any political party during their term of office so as to ensure independence of their functions within this Commission. In order to ensure the policies and supervising affairs could be exercised independently by this Commission, a “fund for financial supervision” has been established to deal with expenditures incurred by this Commission.

The TSE and GTSM are extremely liquid and volatile. Average annual turnover rates have surpassed 200% in recent years. At the end of 2006, there were 688 firms listed on the TSE, and the capitalization level of the TSE-listed companies was NT$ 5,522.67 billion. Meanwhile, the number of GTSM-listed companies was 531, with a capitalization level of NT$ 726.2 billion. In addition, there were still 673 public companies that were not yet listed on either the TSE or GTSM exchanges with a capitalization level of NT$2,144.4 billion. In 2005, the ratio of market value of listed shares to GDP is about 140.25%. Electronics and high-tech companies represent one-third to half of the trading or market capitalization. Most listed companies are still family owned and controlled (albeit increasingly through holding companies), and the overwhelming majority investors in this market are individuals.

3.3.2 Trend of Separating Ownership and Control

Small- and medium-sized enterprises (SMEs) are the majority corporation style in Taiwan, constituting over 90% of total companies. The board members in SMEs tend to be family-related, which means companies in Taiwan do not have significant numbers of outside shareholders who are not members of the family or business associates. Important decisions are actually taken by the “family board”. Even when the company is growing bigger and goes public, family-control is still a dominant characteristic in large corporations. Mostly, the shareholding of listed companies is still under the control of the family. There are both advantage and disadvantage in family-controlled business. The advantage is having a strong leadership and cohesive management team formed by the family members. The disadvantage is companies, dominated by one businessman or one family, tend to grant the right of governance over the company for the benefit of their own interests and abusing minority shareholders.

As the transformation from traditional labor-intensive industries to high-tech companies since early 1980s, Taiwan has revealed a demanding trend towards separation of ownership and control. The major explanation is that high-tech companies need to share ownership with scientists, engineers and managers so as to stay competitive. At present Taiwan stock market, electronics and high-tech companies represent one-third to half of the trading or market capitalization.

3.3.3 Environment of Group Operation

Most businesses in Taiwan started from a primary industry and gradually diversified into other segments afterwards. Diversification would bring business expansion, efficiency, strategic alliance, and risk segregation for them. They may use cross-shareholding of affiliated companies to strengthen their control of listed companies. They may even obtain external financing through bank loans or capital markets. However, over-reliance on using stocks as collateral to leverage has created a hidden financial risk in a number of listed companies. When the stock price slumps, the borrowers are included to maintain the stock prices in order to avoid providing more stocks as collateral. Therefore, they have to use whatever sources available to do so. The worst situation is the business group owners even commit frauds to take corporate assets as a source. While the stock price continues to fall, the shields collapse. Then the delinquency occurred. The financial difficulties of many Taiwan enterprises in 1997-1998 are just the cases that demonstrate causality of imprudent and highly leveraged investment. These failures are mainly the result of inadequate corporate governance that related to misconduct or even fraud of owner/executive.

In January 2007, Reba Group file an application for reorganization to the court and raised investors’ misdoubt, then induced customers’ panic of its affiliated company, the Chinese Bank. In order to prevent a chain reaction, the FSC asked Resolution Trust Corporation (RTC) to takeover the Chinese Bank. TSEC and GTSM immediately announced the trading suspension for the listed companies of Rebar group. The major shareholder, Wang’s family, used the benefit of the Section 27, Company Act that allow a company board member to appoint its owned mandatory, and controlled every board of its cross-shareholding company. On the one hand, with assistance of companies’ certifying certified public accountants, Wang’s family disguised their false trading and file misrepresentative statements to the FSC. On the other had, used insider trading to manipulate stock price. This case has been accused by prosecutors, and raised debate regarding affiliated company control power.

3.3.4 Cross Shareholding Scenario

Before 2001, there was no provision prohibiting cross shareholding between parent and subsidiary companies in Taiwan’s Company Law; therefore, manipulation of the legal framework sometimes occurs. Subsidiary companies are set up as investment companies and buy a great deal of their parent companies’ shares in the stock market. When the subsidiary companies are elected as directors or supervisors of the Board of parent companies, the individual directors or supervisors sell their holdings but remain on the Board and participate in decision making as representatives of the subsidiary companies. Moreover, the Company Law does not restrict different representatives of the same institutional shareholders from being elected director and supervisor irrespectively. Having the same institutional shareholder acting concurrently as director and supervisor greatly affects the fundamental function of supervisors. To avoid the manipulation of the legal framework, subordinate company shall not redeem or buy back any of controlling company shares, nor accept any of them as security under the 2001 amended company law. In 2005, an amendment was made to Company Law whereby a company shall have no voting power in respect of the share issued by itself and in its own possession（§179 Company Law）. Furthermore, the amendment to the Securities & Exchange Act promulgated on January 11, 2006 contained the provisions to strengthen the independence for director and supervisors. According to the new provisions, where institutional investors acts as a shareholder, Governmental or institutional investors may not assign representative be elected as a director or supervisor of the company at same time（§26-3 Securities & Exchange Act）.

3.3.5 Development of Foreign Investment

Foreign investment in portfolio or securities is more short-term oriented. Foreign direct investment usually has more long-term impact on economic development and brings in technology as well as employment to invested countries. Therefore, it is generally considered more beneficial to invite foreign direct investment than foreign investment in securities. Taiwan opens its securities market for foreign investment in three stages. It first allows foreign investment in securities market through investment fund indirectly in 1982. Then, it opens the market for foreign institutional investors in 1990. In 1996, all foreign institutions and individuals are allowed to invest in Taiwan’s securities market. Meanwhile, due to growing production costs since mid-1980s and shortage of labor, Taiwan’s business started shifting some of its production facilities overseas. PRC and ASEAN countries are two primary regions for Taiwan’s foreign direct investment.

In order to achieve a higher standard of transparency, the Authority promulgates additional rules, which requires listed companies to disclose the information of their foreign investment and foreign direct investment in PRC.

3.3.6 Passive Role Player of Institutional Investor

Individual investors, constituting almost 80% of trading volume, are the major participants of Taiwan stock market. Conversely, institutional investor owns only a minor portion. Based on the Table 1 below, Foreign Institutional Investors owns about 16.2%, domestic institutional investor holds 11.0 domestic individual stockowners holds 70.6%, and Foreign Individual Investors holds 2% in year 2006. The investment decisions of individual investors are generally superficial and easily affected by market sentiment, resulting in a high turnover rate in the market. Moreover, individual shareholders often waive their right to have a voice in company operations due to either their overly small shareholding or to less cohesiveness among the majority of the small shareholders. Consequently, the governing bodies of public companies have neglected the importance of strong corporate governance.

In addition, as institutional investors are restricted by regulations in terms of their shareholding limit or holding period, they play passive role in corporate governance. Although government has a policy to increase the role of institutional investors, which share of ownership is still limited and not able to promote corporate governance concept. Institutional investors in Taiwan play quite different role with that of other country. In the developed countries, such as US, UK, the institutional investors usually are those strong advocates for better corporate governance. They persist on higher standards of corporate governance in companies they invest. Some institutions even have set their own corporate governance standards as a measure for making their investment decisions.

Table 1: Type of Investors and Trading Value Ratio in the Centralized Market Domestic Foreign Domestic Foreign Year Institutional Institutional Individual Individual Investors Investors Investors Investors 1992 3.6 0.3 96.1 0 1993 5.4 0.5 94.1 0 1994 5.8 0.7 93.5 0 1995 6.7 1.4 91.9 0 1996 8.6 2.1 89.3 0 1997 7.6 1.7 90.7 0 1998 8.6 1.6 89.7 0 1999 9.4 2.4 88.2 0 2000 10.3 3.6 86.1 0 2001 9.7 5.9 84.4 0 2002 10.1 6.7 82.3 0.9 2003 11.5 9.4 77.8 1.3 2004 11.6 10.9 75.9 1.6 2005 15.4 14.5 68.4 1.7 2006 11.0 16.2% 70.6 2.2% *Source: Major Indicators of Securities & Futures Markets, Taiwan District, ROC, Securities & Futures Bureau, Financial Supervisory Commission, Executive Yuan, March, 2007.

3.4 Present Issue of Corporate Governance in Taiwan

Taiwan corporations have the features of family-controlled listed company, potential risk of cross- shareholding, and passive role players of institutional investor. Especially, family control demonstrates a dominant characteristic of large corporations in Taiwan. In many companies, the largest family holds more than half of the board seats. Thus, they have substantial control over decision-making and agendas in Shareholders Meetings. Under this structure, there is not sufficient check-and-balance mechanism in corporate board and top management. More precisely, if the owner/executive commits moral hazard to take advantage of the company, general stakeholders, or minority shareholder, there would be no effective control mechanism to prevent it from happening. Therefore, the bottom-line corporate governance issue for Taiwan today is to find solutions to avoid wrong doings of the manger that shirks responsibility or embezzles corporate assets for personal use.

In Taiwan, Board of directors and Supervisors are the important organs designed to hold managers accountable to capital providers for the misuse of firm assets. As the growth in the size of businesses, the separation of ownership from control is demanding in Taiwan. Separation of ownership and control is associated with professional management. The risk of management refers to the managers that may govern the corporation to their own interest rather than the interest of the corporation and shareholders/owners. The challenge to corporate governance needs to reduce professional managers’ act for self-dealing.

4. Implementation of Corporation Governance

4.1 Board of Director

Under the OECD Principles of Corporate Governance, the corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management, and the board’s accountability to the company and the shareholders. Taiwan fulfills these principles through the following regulations in company law and securities law.

4.1.1 Composition

4.1.1.1 Size of the Board

Board should be comprised of at least three directors who are elected by the shareholders' meeting from among the persons with disposing capacity（§192 Company Law）. In the case of public companies, Boards should include at least five directors.（§17 Supplementing Rules to TSE Listing Rules）. The limitation that directors should be elected from among shareholders has been abolished in 2001 Company Law amendment. A company may elect standing directors from among the directors while the number of director has reached nine. During the recess of the board of directors, the standing directors shall regularly exercise the power and authority of the board of directors in accordance with laws and regulations, Articles of incorporation, and resolutions of the meeting of shareholders.（§208 Company Law）

Reforms have been undertaken to introduce the concept of the independent director. In 2002, the listing rules of TSE /GTSE have made amendment and every public company applying for listing should have at least two independent directors and one independent supervisor. And, at least one independent director must be an accounting or finance expert. Another reform was the amendment 2006 of the Securities & Exchange Act to encourage at least one-fifth of the Board’s directors should be independent for all public companies. And also, the number of independent directors shall not be less than two.（§14-2 Securities & Exchange Act）.

4.1.1.2 Independence

I. Board Independence

To strengthen the board structure, the Amendment of Securities & Exchange Act on January 11, 2006 required that Board should have at least five directors, and less than one-half of Board members have an affiliation with limited exception (ex. with permission of authority). Affiliation exists between spouse and linear relatives by blood within the second degree of relationship. In addition, at least one director of the applicant company are not mutually related with any one supervisor in the relations listed above（§26-3 Securities & Exchange Act）.

Under the authorization of Section §14-2, Securities & Exchange Act, the FSC promulgated “Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies”, and prescribes an independent director of a public company may not have been or be an employee or any affiliated person (i.e. Board member, executive officers) of the company or any of its affiliates. (Rule §3 of the “Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies”)

II. Independent Director Criteria

The Rule mentioned above also prescribes the criteria for an independent director candidate, candidates shall meet one of the following professional qualification requirements, and with at least five years work experience:  An instructor or higher in a department of commerce, law, finance, accounting, or other academic department related to the business needs of the company in a public or private junior college, college, or university;  A judge, public prosecutor, attorney, certified public accountant, or other professional or technical specialist who has passed a national examination and been awarded a certificate in a profession necessary for the business of the company.  Have work experience in the area of commerce, law, finance, or accounting, or otherwise necessary for the business of the company. A person to whom any of the following circumstances applies may not serve as an independent director, or if already serving in such capacity, shall ipso facto be dismissed:  Any of the circumstances in the subparagraphs of Article 30 of the Company Act.  Elected in the capacity of the government, a juristic person, or a representative thereof, as provided in Article 27 of the Company Act.  Any violation of the independent director qualification requirements set out in these Regulations.

III. The Independency

According to Section 3 of the Rule, any of the following conditions falls on the part of persons in the last two years before the board member election or in service of his/her independent director term, he or she should not participate the independent director election or acting as an independent director.  Being an employee of the company or its affiliated companies.  Being a director, supervisor of the company or its affiliated companies, but being an independent director of the company is allowed to hold the same positions in its holding company and subsidiary.  Directly or indirectly holding 1% or more of the total outstanding shares of the company, or being one of the top ten natural person shareholders of the company.  Being a spouse or direct relation within the second degree of kinship of any of the persons in the preceding three subparagraphs.  Being a director, supervisor, or employee of a juridical person shareholder that directly or indirectly holds 5% or more of the total outstanding shares of the applicant company or being a director, supervisor, or employee of one of the top five juridical person shareholders.  Being a director, supervisor, manager, or shareholder holding 5% or more of the shares of a specific company or institution that has financial or operational interactions with the company.  Being a professional, an independent contributor, a partner, or a company, or an executive director, partner, director, or manager of an institutional consortium or the spouse of same that provides financial, business, or legal or consulting services to the company or an affiliated enterprise of same.  Concurrently serving as the independent director of a company shall not serve as the same position in four or more other enterprises.

Furthermore, where a person serving as independent director of the listed company, he or she has to receive at least three-hour training per year to acquire professional knowledge in the areas of law, finance, or accounting and obtain the relevant certification documents.

4.1.1.3 Board Nomination System

The Amendment of Company Law on June 22, 2005 introduces a nomination system for the directors of the board. Adoption of the public companies with Candidates of Board Nomination System under the revised Company Law is optional. Election of Supervisors is subject to the same nomination system. (§192-1, §216-1 Company Law). To assure the election of independent directors preclude the interference form the management or major shareholders, the Rule requires independent directors election shall adopt the new candidate nomination system to allow the shareholders who hold at least 1% shares owns the nomination right besides the company.

4.1.2 Duties and Responsibilities Company law in Taiwan grants directors the authority to exercise their power broadly. All matters may be decided by resolutions of the board of directors, unless this Law or Articles of incorporation provide that certain matters shall be resolved at the meeting of shareholders. Besides, Board should operate on the basis of collective responsibility. While conducting business, the board of directors shall act in accordance with laws and regulations, the Articles of incorporation, and the resolutions of the shareholders meeting. (§193, §202 Company Law) Generally speaking, the Board is responsible for ensuring compliance with laws and regulations, as well as avoiding conflict of interest, and supervising the management performance. The board of directors should establish rules governing the procedures for special transactions, such as mergers, acquisitions and other capital transactions in the company. Taiwan’s contains no explicit provision on directors’ fiduciary duty but duty of care for years. In consequence, the misconduct cases happened in 1998-99 had been referred to criminal enforcement. Company law amendment 2001 makes it clear that any responsible person of a company, while conducting the business of the company, should act with duty of care and duty of loyalty. The director holds the legal liability if his act to company breach of trust （§23 Company Law）.

In addition, the January 2006 Amendment request companies adopt the rules for proceedings of board meetings to enhance the efficiency of Board (§26-3 Securities & Exchange Act). The Amendment also require the following matters should be carried out pursuant to a resolution of the board of directors (§14-3 Securities & Exchange Act).  reviewing and assessing internal control processes under §14-1 Securities & Exchange Act  disposition or transfer of material assets, borrowing a substantial amount, establishment under §36-1 Securities & Exchange Act  review directors/supervisors conflict of interest conflict of interest  review transaction of material assets or derivatives  review major borrowing, endorsement or guarantee  review raise capital, issue or private placement of securities with the nature of equity shares  appointment and discharge of internal auditor  review and assessing the appointment, independence of external auditor  review and assessing the appointment of directors of financial department, accounting department, and internal auditor  review other relevant businesses approved by the Competent Authority

4.1.3 Mechanisms for Controlling Board

To avoid managerial abuse, there are some check-and-balance designs in Taiwan’s Company Law and Securities & Exchange Act.  Request the Board to stop unlawful act. When the board of directors in executing its business has violated law and regulations, or the Articles of incorporation, the supervisor or any shareholder who has continuously held his shares for a period of one year or longer shall immediately notify or may request the board to terminate such acts.（§194, §218-2 Company Law）  Discharge disqualified directors. A director may, by a resolution adopted at a meeting of shareholders, be removed from office at any time.（§199, §200 Company Law）  Avoid conflict of interest. While acting the same business with the company for himself or others, a director needs to secure the approval from the shareholders meeting. If he fail to do so, such earnings deriving above should be treated those of the company.（§209 Company Law）  Filing a lawsuit. Shareholders who have continuously held 3% of shares for one year or longer may request a supervisor to file an action against a director for the company. If the supervisor fails to do so within thirty day, the shareholders may file an action himself for the company. （§212, §214 Company Law）  Limitation on self-trading. When a director is engaged in a negotiation with the company on his own account or on behalf of others, the supervisor shall be the representative of the company. （§206, §223 Company Law）

4.1.4 Database for Independent Members

For the adoption of independent directors and independent supervisor, the SFI, at the request of SFC, has established “Database for independent directors and independent supervisors” （ available at http://www.sfi.org.tw/watch/main.asp ） . The qualifications to register in the database include both “independence” and “profession”. Therefore, public companies may select the right independent directors or supervisors either by themselves or by searching the database. Currently, the database holds about 250 qualified candidates’ information.

4.1.5 Disclosure of Share Transactions by Directors and Controlling Shareholders

Regarding insiders’ share transactions, the FSC requires all the public companies to follow up the following measures: 1. Pre-filing According to Article 22-2 of the “Securities & Exchange Act”, the transfer of stocks by the directors, supervisors, managers, or shareholders holding more than 10% of the total shares of an issuer under this Act shall file an effective registration with the Competent Authority and on a centralized exchange market or an over-the-counter market. The calculation of shares held by shareholders mentioned above shall include those shares held under the names of their spouses, minor children and those held under the name of other parties. 2. Ex post facto filing According to Article 25, Paragraph 2 of the “Securities & Exchange Act”, The stockholders referred to in the preceding Paragraph shall file, by the fifth day of each month, a report with the issuer of the changes in the number of shares they held during the preceding month. The issuer shall compile and file such report of changes with the Competent Authority by the fifteenth day of each month. 3. Pledge contract filing According to Article 25, Paragraph 4 of the “Securities & Exchange Act”, when the shares referred to in the first Paragraph hereof are pledged, the pledgor shall make immediate notification to the issuer; the issuer shall inform the Competent Authority of such pledges within five days of their formation, and publicly announce such pledge.

Moreover, Article 18 and 19 of the “Corporate Governance Best-Practice Principles for TSEC/GTSM Listed Companies” requires a controlling shareholder of any TSEC/ GTSM listed company shall comply with the following provisions: 1. Shall bear a duty of good faith to other shareholders and shall not directly or indirectly cause the company to be engaged in transactions at other than arm's length or involved in a management conduct for illegal profit. 2. Shall follow the rules implemented by its company with respect to the exercise of rights and participation of resolution, so that at a shareholders' meeting, the representative shall exercise his/her voting right for the best interest of all shareholders and in good faith and exercise the fiduciary duty and duty of care of a director or supervisor. 3. Shall comply with relevant laws, regulations and the articles of incorporation of the company in nominating directors or supervisors and shall not act beyond the authority granted by the shareholders meeting or board meeting. 4. Shall not improperly intervene on corporate policymaking or obstruct corporate management activities. 5. Shall not restrict or impede the management or production of the company by methods of unfair competition such as monopolizing corporate procurement or foreclosing sales channels.

A TSEC/GTSM listed company shall ensure the command at any time of information on the identity of major shareholders, who own a higher percentage of shares and have an actual control over the company, and its ultimate control persons. The major shareholder indicated in the first paragraph refers to those who owns five percent or more of the outstanding shares of the company or the shareholding stake thereof is on the top ten list, provided however that the company may set up a lower shareholding threshold according to the actual shareholding stake that may control the company.

4.2 Supervisors and Audit Committee

The January 2006 Amendment of Securities & Exchange Act provides an alternative system that replaces Supervisors with audit committee system. Therefore, there will be two types of corporate governance legal framework for public companies in Taiwan: a Supervisor system consisting of general meeting of shareholder, the board of directors, Supervisor, and a audit committee system consisting of general meeting of shareholder, the board of directors, and audit committee. The selection is left to individual companies with limited exception.

4.2.1 Supervisor System

4.2.1.1Composition

I. Number

According to Article 216 of Company Law, at least one supervisor shall have a domicile within the territory of the Republic of China. The number of supervisors should be not less than two in public companies. TSE listed companies’ supervisors should include at least three members who lack significant family and business relationships with directors.

II. Criteria

Before the 2001 amendment to the Company Law, supervisor was elected from the shareholders. The amendment in 2001 has abolished the limitation. Supervisors in Taiwan are responsible for monitoring directors and management. Independence is a determinate factor for them to play their roles effectively. Therefore, a supervisor shall not concurrently be the director, manager, or employee of the company. （ §222 Company Law ） . Supervisors in public company should include at least three members who lack significant family and business relationships with directors. If more than two-third of them have affiliation, there would be lack of independence. Affiliation exists between (1) Spouse; (2) Linear relatives by blood within the third degree of relationship; (3) Collateral relatives within the fourth degree of relationships; (4) The representatives of the same juristic person; or (5) affiliates. （§9(12) TSE Listing Rules, §17 Supplementing Rules to TSE Listing Rules）.

The amendment to the Securities and Exchange Act promulgated on January 11, 2006 contained two provisions to strengthen the independence for supervisors. One relates to limit the application of Article 27 of Company Law, which authorized the institutional investors to assign representative be elected as a director or supervisor of the company at same time where institutional investors acts as a shareholder. The other is not an “affiliate’ between supervisors or “supervisor and director”. Affiliation exists between (1) Spouse; (2) Linear relatives by blood within the second degree of relationship. At least one supervisor of the applicant company are not mutually related with any one director or supervisors in the relations listed above（§26-3 Securities and Exchange Act）

4.2.1.2 Duties and Responsibilities

The functions of Supervisors in Taiwan equivalent to the Audit Committee of that in the United States. They should provide an important internal mechanism for holding directors and management accountable. Thus, supervisors fulfill their duties by providing an independent and objective review of the financial reporting process, internal controls and the audit function. Supervisors in Taiwan can wield significant oversight power and are potentially powerful.  Individually exercise duties. Supervisors may exercise their duties individually (§221 Company Law) in the following matters:(1) Supervisors shall make a thorough investigation into the application of the company(§146 Company Law); (2)A supervisor may at any time investigate the business and financial condition of the company, examine books(§218 Company Law); (3) A supervisor shall check and investigate all statements and records (§219 Company Law); (4) A supervisor shall immediately notify the board to terminate improper business. (§218-2 Company Law); (5) Check the property where the company issues new shares (§274 Company Law); (6) Examination the balance sheet and inventory the liquidator sends (§326 Company Law); (7) Examination all statements and records of accounts the liquidator sends (§331 Company Law)。  Act on behalf of the company. The supervisor shall act on behalf of the company, such as in case of a lawsuit between the company and a director. (§213, §214 , §218 , §219 , §418 Company Law)  Convene shareholders meeting. A supervisor may, when deemed necessary or was ordered by the court, convene a meeting of shareholders. (§214, §245 Company Law)  Attendance of Supervisors in the Board of Directors. (§218, §218-2 Company Law)

4.2.1.3 Mechanisms for Supervisors

There are some check-and-balance designs in Taiwan’s Company Law to make sure a supervisor execute his/her duties faithfully.  File a lawsuit against supervisor. The meeting of shareholders may resolve to file a lawsuit against supervisor.（§225, §227 Company Law)  Discharge disqualified supervisor. While performing his duties, if supervisor has done any act causing great loss or damage to the company, or any act in serious violation of law and regulations or the Articles of incorporation, a shareholder that satisfies shareholding requirement may file a suit. (§200 Company Law）  Joint liability. A supervisor shall be liable to compensate the company for any loss or damage resulting from negligence in performing his duty of supervision. If a supervisor is liable to compensate the company or a third party and a director is also liable, such supervisor and director shall be a joint creditor.（§8, §23, §224, §226 Company Law）  Shareholding requirement. The FSC required the supervisor of public companies to hold certain amount of the company’s stock, and to disclose ownership information of supervisor, including shareholding percentage of supervisor and change of supervisor’s share holding.（§26 Securities & Exchange Act）

The Company Law allows institutional or government shareholders to appoint their representatives as directors and supervisors, and this inherent conflict of interests essentially against the rules that a supervisor shall not concurrently be the director of the company. The affiliation between Supervisor and major shareholders has also weakened their functions. Besides, the duties and responsibilities are really burdensome for an inexperienced one to handle. Therefore, to increase independent outside supervisor should be an improvement to upgrade the corporate governance environment.

4.2.2 Audit committee

4.2.2.1 Composition of Audit Committee

The January 2006 amendment of Securities & Exchange Act required that the audit committee should comprise at least three members, which included all independent directors. The members of the Committee should designate a Chair In addition, at least one member of the committee should be an accounting or finance expertise（§14-4 Securities & Exchange Act）.

4.2.2.2 Responsibilities of Audit Committee

 assigned responsibilities of supervisors in Securities and Exchange Act, company law, and other related laws（§14-4 Securities & Exchange Act）.  The regulations for supervisors in the case of representing the company are also binding the independent director of audit committee（§14-4 Securities & Exchange Act）.  Review internal control, financial report and assigned responsibilities of independent director in Securities & Exchange Act （§14-5 Securities & Exchange Act）.

4.2.2.3 Rules of Procedure

A majority of the members of Audit Committee shall constitute a quorum to transact business. The items having the major effect in the company’s finance and business should decide by majority vote of the full Audit Committee member and also approve by Board Resolution. The major effect items may also approve by two-third vote of the full Board members without the majority vote of the full Audit Committee members （ §14-5 Securities & Exchange Act ） . The FSC has announced “Regulations Governing the Exercise of Powers by Audit Committees of Public Companies” to implement the audit committee responsibilities requirement under Article 14-5 of Securities and Exchange Act.

4.3 Meeting of Shareholders

Under the OECD Principles of Corporate Governance, the corporate governance framework should protect shareholders’ rights, and ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for violation of their rights. Taiwan fulfills these principles through the following regulations in the company law and securities laws.

4.3.1 Shareholder Participation

As the owner of the corporations, the corporation performance affects the investors directly. Under the company law, investors in Taiwan may exercise the rights to play an important role in corporate governance as following:  Voting right to elect and discharge directors and Supervisors. The shareholder shall elect and discharge directors and supervisors by voting in the meeting of shareholders.（§192, §199, §216 Company Law）  Shareholder Proposal（§172-1 Company Law）  Determine the remuneration. The remuneration of directors and Supervisor shall be determined by a meeting of shareholders（§192, §196, §227 Company Law）  Modify or alter Articles of incorporation. A firm shall not modify or alter its articles of incorporation without a resolution adopted at a meeting of shareholders.（§277 Company Law）  Approval for material transaction. A company shall not do any of the following acts without a majority votes resolution adopted by shareholders meeting: (1) Enter into, amend, or terminate any contract for lease of the company's business in whole, or entrusting others to operate the business, or for regular joint operation with others. (2) Transfer the whole or any essential part of its business or assets. (3) Accept the transfer of another's whole business or assets, which has great effect on the business operation of the company.（§185 Company Law）  Free of transferring stock. The transfer of shares of a company shall not be prohibited or restricted by its articles of incorporation. Thus, if the performance of company is poor, the shareholder may sell his stocks as a way to express his dissatisfaction（§163 Company Law）

4.3.1.1 Shareholder Proposal

In order to increase the level of participation by shareholders in company affairs, the 2005 amendment of company law now gives the shareholders the right to submit a proposed matter for consideration during the annual general meeting of shareholders, provided that the proposing shareholders shall have been a shareholder of record of at least 1% of the total shares of the company and such a matter is one that can be resolved by a meeting of the shareholders（§172-1 Company Law）.

Article 6 of the “Corporate Governance Best-Practice Principles for TSEC/GTSM Listed Companies” requires the board of directors of a TSEC/GTSM listed company shall properly arrange the proposals and agenda of shareholders' meetings. Shareholders shall be granted reasonable time to deliberate each proposal and afforded an appropriate opportunity to make statements. Moreover, shareholders' meetings that are convened by the board of directors, a majority of the directors to attend the meeting in person would be advisable.

4.3.1.2 Vote Liberal

As a result of the 2005 company law amendment, companies may now allow new methods for the shareholder to cast their votes, i.e., by writing or e-vote under the regulations of Electronic Signature Law to facilitate the personal exercising of shareholders’ voting rights. The voting methods should be described in the notice of Shareholder Meeting.（§177-1, §177-2 Company Law）,

4.3.1.3 Derivative lawsuit

Derivative lawsuit is an important vehicle for minority shareholders to monitor the conduct of management. However, the absence of class-action lawsuits and rigid regulation in derivative lawsuit make serious problem in suing wrongdoing of directors and Supervisors. Before the amendment of the Company Law in 2001, shareholders continuously hold 5% of shares for one year or longer may request in writing for a supervisor to institute an action against a director on behalf of the company. （§214 Company Law） The aim of this article is to protect the minority shareholders by providing them the right to file lawsuit against wrongdoing of directors and Supervisors. However, the criteria, holding 5% of share, is not easy to apply in listed company. The rigid regulation makes it a barrier for shareholder to file a derivative lawsuit. Therefore, the successful case for suing a wrongdoing director or statutory is rare in Taiwan. The amended Companies Law in 2001 has loosened the criteria. The requirement of shareholder now is 3%, instead of 5%. However, Taiwan’s company law still needs to be further amend unreasonable part (such as, institutional or governance shareholders may be directors and supervisors by appointing their representatives) to protect the right of shareholders, and to equally treat shareholder, either minority or majority.

According to Article 192 and 216 of the “Company Law”, directors of the board and supervisors shall be elected by shareholders’ meeting, therefore, all directors and independent directors shall be decided by shareholders’ meeting.

4.3.1.4 Nomination System for Election of Director and Supervisor

The public companies may adopt the nomination system for election of Director and Supervisor. Any shareholder of record of at least 1% of the shares may nominate candidates for the election. To formalize this nomination system, company must amend its articles of incorporation（§192-1, §216-1 Company Law）.

4.3.2 Proxy Solicitation

Market discipline such as proxy solicitation is an effective mechanism for corporate governance. With enough votes, the group can exert pressure on management to act in the best interest of the group. That is to say, a proxy fight is one way to discipline management if they deviate from shareholder value maximization. In Taiwan, in each meeting of shareholders, a shareholder may delegate a proxy to attend the meeting by filling a printed form of power of attorney stating the scope of authority（§177 Company Law ） . To avoid the improper use of proxy solicitation, the Authority has promulgated “Rules Governing the Use of Proxies for Attendance at Shareholder Meetings of Public companies”. According to Section 6, a shareholder shall not consign a trust enterprise or a stock affairs agent to act as the solicitor if he/she involves in conflict of interest, in addition, a subsidiary of a financial holding company shall not be consigned as the holding company’s solicitor if one of the purposes of the shareholders’ meeting is board members election.

To strengthen the administration of proxy rules and protect shareholder’s right, SFB (Taiwan’s SEC) modified “Rules Governing the Use of Proxies for Attendance at Shareholder Meetings of Public Companies” on December 15, 2005. There were substantial improvements in the amended rules. In addition to make new criteria for solicitors, the amendment require any public company shall disclose the management plan of every board member candidate for shareholder’s reference. According to Article 179 of Company Law, the entity with no voting right should not be a solicitor or authorizes trust business and any stock affair agency to proceed to proxy solicitation. The rules have been amended again in December 2006. The new amendment focuses on the solicitation procedure of financial institutions (especially, financial holding companies) and try to preclude the management power transition conflicts interfering the stable operation of them. New rules prescribes as following will be enacted from January 1, 2008:

1. If shareholders’ meeting of a financial institute is proposed to hold election of directors or supervisors, the solicitor share-holding period shall be raised form more than 6 months to 1 year. 2. Major shareholder of any financial institute (holds 10% or above of the company’s underlying shares) who plan to entrust trust business or stock affair agency to be a solicitor, shall holds the institute’s shares at least one year or above. However, under the circumstance of holding a board member election, major shareholders share holds at least 12% or above of the financial institute underlying shares.

4.3.3 Facilitating the Exercising of Shareholders’ Rights

Under the consent of shareholders, company may deliver notice and minutes of annual shareholder meeting by electronic transmission in accordance with the format request of Electronic Signature Law.

Article 7 of the “Corporate Governance Best-Practice Principles for TSEC/GTSM Listed Companies” requires a TSEC/GTSM listed company shall encourage its shareholders to actively participate in its corporate governance and hold shareholders' meetings on the premise of legal, effective and safe proceedings, in addition, listed company shall seek all ways and means, including fully exploiting technologies for information disclosure, so as to enhance the attendance rate of shareholders at the shareholders' meeting and ensure the exercise of shareholders' rights.

4.3.4 Operation Mechanism of Shareholders’ Meeting

According to the Company Law, a shareholder may appoint a proxy to attend a shareholders' meeting in his/her behalf. Anyone who acts as the proxy for two or more shareholders, the number of voting power represented by him/her shall not exceed 3% of the total number of voting shares of the company, however, trust enterprises or stock agencies approved by the competent authority shall be excluded, which means no voting limitation for these institution. The new amendment also allows mail or online voting, but could not vote for any extemporary motions or modified subjects in the meeting.

On May 24, 2001, Ministry of Economic Affairs announced enforcement letter No. 09002108030 to permit the chairman of the shareholders’ meeting could acquire majority attendants’ votes agree to adopt a motion by simply oral request by the chairman if no one object the contents of the motion.

Section 14 and 15 of the “Rules Governing the Conduct of Shareholders Meetings by Public Companies” prescribe: when the chairman considers that the discussion for a motion has reached the extent for making a resolution, he/she may announce discontinuance of the discussion and submit the motion for resolution. The persons for supervising the casting of votes and the counting thereof for resolutions shall be designated by the chairman, provided, however, that the person supervising the casting of votes shall be a shareholder. Moreover, TSE / GTSM “Best Practice for Public Companies Shareholders’ Meeting” prescribes the chairman of the meeting could request all the attendants will. If anyone dissents from the motion, the meeting shall votes for the motion and makes a decision.

4.4 Information Disclosure and Transparency

According to the OECD Principles of Corporate Governance, the corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company. Taiwan implements these principles under both provisions in Company law and securities law. To provide investors with timely, accurate and relevant information, Taiwan public companies have the obligations to provide and disclose information under both provisions in Company law and securities law. Under securities law, primary market and secondary market disclose different documents or information. As in the case of affiliated corporations, an additional disclosure of consolidated financial statements is required. Detailed information disclosure please refers Appendix I "List concerning what information Public companies should announce to the public or report to the FSC" (http://www.sfb.gov.tw/ ensfcindex.htm). 4.4.1 Dissemination of the Primary Market Information

Taiwan’s company law and securities laws have many rules governing the issuance and transfer of shares. The Prospectus is the most important document in the disclosure process of listing. The major contents of the Prospectus should include: (1) The extent of open public disclosure; (2) Operating conditions; (3) Operating and capital budgeting plans; (4) Financial conditions; (5) Specially stipulated items and events; and (6) Important resolutions.

In order to enhance corporate governance of listing companies, TSEC amended rules to require initial public offering companies shall file “Corporate Governance Self-assessment Report” with other registration documents. In addition, underwriters shall descript the corporate governance system of the IPO issuer and providing their opinion. （ for details, please refer to the website, http://www.tse.com.tw/docs1/data01/set /public_html/0960005558.htm）

4.4.2 Disclosure of the Secondary Market Information

Information disclosure in the secondary market is a process by which a listed firm discloses material information full, timely and publicly on a regular or irregular basis. The regular disclosure documents in trading market include financial reporting, financial forecast (not mandatory), annual report, and a statement of total operating revenues, also internal auditing operation and insider trading information. To avoid financial statements containing misleading information or not disclosing the important financial or operational information timely or properly, FSC requires semi-annual financial statements and forward looking statements should be reviewed by certified public accountant (CPA). As to irregular basis of disclosure, FSC promulgates rules and guidelines towards special disclosure requirement that may affect shareholders’ interests, such as “Rules Governing Acquisition and Disposition of Asset by Public companies”. Information disclosed on an irregular basis includes events that may have a large impact on stock prices and shareholders’ equity, matters regarding the offering and issuance of securities, matters regarding the acquisition or disposal of assets, matters regarding investment in Mainland China, and matters regarding changes to accounting principles. Moreover, Article 14 of the Securities & Exchange Act require the board, manger, and chief of accounting department shall file a declaration to assure there is no false or misrepresentation in company’s disclosed information.

The Taiwan Stock Exchange and Gre Tai Securities Market will establish “Financial Highlights” section for public listed companies in June 2007. The Highlights will include key statistics and trading information specified by The Taiwan Stock Exchange and Gre Tai Securities Market, including changes of trading rules, net value per share falling below NT$10 with continuing net losses, having abnormally high debt ratio…etc. Any public listed company, which has changes in any highlight statistics, should have those information marked in red.

4.4.3 Corporate Governance Disclosure in Annual Report

According to the “Criteria Governing Information to be published in Annual Reports of Public Companies” (content available at: http://eng.selaw.com.tw/ FLAWDAT01 .asp? LSID=FL007032) for following up the international corporate governance principles. All public companies are required to disclose employee bonuses distribution and integrate all the risk-related information evaluation. The related disclosure requirements of regulations are set out below: Table 2.: The Corporate Governance Disclosure Requirements in Annual Report of Public Companies Area Disclosure requirement Source Information to be  A repot to shareholders. Published in Annual  A company overview. Reports of Public  Information on implementation of the Companies (Regulations company’s corporate governance. Governing Information to  An overview of business operation. be Published in Annual  A disclosure of company’s capital and Reports of Public shares, corporate bonds, preferred Companies §7) shares, global depository receipts, employee stock option certificates, and merger and acquisition activities.  An overview of company’s financial status.  A review and analysis of the company’s financial condition, business performance, and risks.  Other items deserving special mention. Information on directors  Disclosure should be made of the §10-2-(1) and supervisors remuneration of individual directors, supervisors, and executives during the year.  Describe the independence and qualifications of the directors and supervisors.  Disclose directors of board and supervisors elected date and positions they hold during the term. And report the activities of the Board of directors and Auditing committee.  The employment status of staffs who endorses the company’s financial statement. Capital structure  Establish new disclosure requirements §10-2-(1) for the insider's equity transfer and §10-3 equity pledges.  Details of directors’ and substantial shareholders’ interests in company and associated corporations.  Describe the capital structure, major share ownership and shareholder diversification.

Management Discussion  Describe a review and analysis of §7-6 & Analysis company’s financial condition, business §11-8 performance, and risk management measures.  Provide details of the remuneration and bonus of employees.  The information regarding change in chief auditor. Other mandatory  The differentials in corporate §10-2-(1) disclosures governance and the practice of the §21-4 Principle of Corporate Governance of §21-7 the Public Company §21-8

 Details of the major resolutions approved by the Board meeting or Shareholder annual meeting during the year.  Identify the status of any internal auditing regulatory noncompliance issues on insiders or the company, and present the resolution of the case  Describe the current situation and future development of the industry, the connection among the up-, middle-, and down-stream industries, the development and competition of the products, and long-term or short-term business promotion plans.  Disclose the execution of the employee benefits, on-job training, pension plan, how the company supporting the employee’s right protection, and making compromise between the employee and employer.

To enhance the transparency of the public company financial statement, Section 22 of the “Guidelines Governing the Preparation of Financial Reports by Securities Issuers” requires every issuer shall disclose the information regarding the professional fees of the certified public accountant in the following circumstance:  When professional fees paid to a certified public accountant or the accounting firm of a certified public accountant or its affiliate for non-auditing services account for a proportion equal to one- quarter or more of the fees paid for auditing, or when fees paid for non-auditing services reach 500,000 N.T. Dollars or more, the amount of fees paid for both auditing and non-auditing service as well as the nature of the non-auditing services performed shall be disclosed.  When the issuer changes its accounting firm and the amount of fees paid for auditing services during the year in which the change is made are lower than for the previous year, the amount by which the fees decreased, the proportional decrease and the reasons therefore shall be disclosed.  When the amount of fees paid for auditing services is lower than for the previous year by fifteen percent or more, the amount by which the fees decreased, the proportional decrease and the reasons therefore shall be disclosed.

On June 2, 2003, the Authority promulgated “Guidelines Governing the Preparation of Financial Reports by Publicly Held Bank” and “Guidelines Governing the Preparation of Financial Reports by Bills Finance Company” to provide a uniform disclosure documental devise and enhance the transparency of banks and bill finance companies.

4.4.4 Disclosure of Affiliated Corporations

To protect the rights of minority shareholder and creditor, the controlling company and subordinate company of a public company shall, at the end of each business year, prepare a consolidated business report, consolidated financial statements, and a report regarding the relationship of legal acts and status between them.（§369-12 Company Law）

Considering increasing number of business affiliates in Taiwan, the Authority published the “Guidelines for Compilation of the Group Companies Management Report, the Consolidated Financial Statements, and the Relationship Report” in 1999 and required that the three reports include the following:  The Group Companies Management Report: The contents include the organizational chart, shareholding status of directors, supervisors and the general manager, the related party transactions among group members, financial status and operational results of each company, etc.  The Consolidated Financial Statement: Any public company shall disclose Consolidated Financial Statement while compiling annual report. The contents shall include financing accommodation among group members, endorsement or guarantee, transactions on derivative products, material matters, after day items, and the holding of bills and securities. Starting from 2005, all the TSE & GTSM listed companies shall disclose semi-annual Consolidated Financial Statements.  The Relationship Report: the contents shall include the purchasing & selling of goods and asset transactions, financing, and endorsement among group companies.

4.4.5 Public Disclosure System

The latest amendment of the Company Law provided that company announcements may be made according to the regulations stipulated by the FSC. Therefore, public companies under Securities regulations shall disclose information through the” Market Observation Post System” established by TSE or GTSM (available at website: http://emops.tse.com.tw). Public companies now have legal grounds to publicize information via Internet. In addition, copies of corporate paper filings are also available at SFI library, TSE Public Relations Office, GTSM Administration Department, and Chinese Securities Association (CSA).The “Corporate Governance Best-Practice Principles for the TSE/GTSM Listed Companies” also advise listed companies should set up a website containing the information regarding the company’s finance, operation and corporate governance.

4.4.6 Information Disclosure Ranking System

To promote corporate transparency by developing evaluation criteria that can not only well examine local disclosure practices but also comply with international standards, the SFI, entrusted by TSE and GTSM, has conducted “Information Disclosure and Transparency Ranking System (hereafter IDTRS)” since 2003. The ranking criteria are base on the latest publicly available information, including annual report, information on ” Market Observation Post System”, and company’s website. The ranking is assigned to each of the following five categories:  Compliance with the mandatory disclosures  Timeliness of reporting  Disclosure of financial forecast  Disclosure of annual report (including ownership structure, board structure, and transparency of financial and operating review)  Corporate website Disclosure

Each disclosure item is in the form of a “yes” or “no” question to ensure objectivity, and each “yes” is equal to one point opposite to each “no” to zero. IDTRS does not endeavor to access the accuracy of the information. Annual ranking results will be released in May on the website: http://www.sfi.org.tw/english.

4.4.7 Corporate Governance Framework Assessment System

Corporate governance can be implemented through regulations to ensure the proper internal control of a company. However, the best way to achieve the implementation of corporate governance is to make corporate governance evaluation criteria for investors when they are choosing their investment target. In order to achieve this goal, there must be an evaluation system, which can reflect the degree of corporate governance practicing. The system will be able to influence investors while they are choosing their investment target, and will be able to increase correlation between corporate governance and shareholders’ right. The Corporate Governance Framework Assessment System has six criteria: Insuring shareholders’ right, enhancing information transparency, strengthening functions of board of directors, utilizing supervisors’ power, enhancing disciplines and communication within management team, respecting right of stakeholders and taking social responsibilities. The evaluation will use the six criteria as guideline, combine with interview, survey, Information Transparency and Disclosure Ranking Score from SFI, and other related documents to evaluate the degree of corporate governance of each listed company. Companies with passing grade will be reward with the Certification from Corporate Governance Association in Taiwan.

Corporate Governance Framework Assessment System encourages companies to apply for evaluation. The evaluation is executive by a commissions and a research team. The 2nd Corporate Governance Framework Assessment Certificate has been issued to 6 companies at March 2007, which includes TSMC, Cunghwa Telecom, Taiwan Mobile, China Steel, Yageo, and Macronix.

4.5 Disgorgement against Insider’s Short-Swing Profit

Under Article 157 of Securities & Exchange Act, the company shall claim for “short-swing trading” profit while insiders of listed companies sell the listed securities within six-month after its acquisition, or repurchase the securities within six months after its sale.

The SFI has maintained an active enforcement program in the above area. Since owning one trading unit in each Taiwan listed company, the SFI, based on Securities Law, firstly demand in writing those companies to claim insider’s short-swing profit. For those companies that delayed in claiming, the SFI shall claim as the company’s shareholder. There were 907 cases managed by the SFI in 2002, of which 809 cases were closed, 22 cases were pending in litigation, and 74 cases were in recourse process. The Securities & Futures Investors Protection Center (SFIPC) takeover the short-swing profit disgorgement matters from January 2003. For more detailed information, please refer Appendix II “List of Total Short-Swing Profit Claim against Insiders”.

In order to prohibit price manipulation and insider trading to maintain the securities trading order and establish justice in the market, TSE and GTSM have executed respective market surveillance. In addition, TSE, GTSM, and TAIMEX have collaborated in executing inter-market surveillance and crisis handling mechanism since 1999. Securities & Exchange Act Amendment §21-1 also authorized the Authority and related SROs to sign up information exchange and cooperation agreements or MOU with foreign authority, SROs, and international organizations to inhibit cross-boarder criminals.

5 .The Role of FSC in Corporate Governance

In Taiwan stock market, individual investors constitute the major participant of the market. Insufficient function of institutional investors and lack of effective market discipline mechanism encourage FSC to play a leadership role in promoting good corporate governance.

5.1 No Cross-shareholding among Affiliated Corporations

Owing to the hidden risk of cross-shareholding among affiliated corporations, a subordinate company shall not redeem or buy back any of controlling company shares, nor accept any of them as security under amended company law in 2001.（§167 Company Law）, also, a company have no voting power in respect of the share issued by itself and in its own possession （Company Law §179）. To enhance the supervision for the financial and operation control of affiliated corporations, the Authority amended the “Regulations for the Establishment of Internal Control Systems by Public Companies” twice in year 2003 and 2004.

5.2 Improving Information Transparency

5.2.1 Earlier Announcement of Annual Financial Reports

Under the present securities law, an issuer shall announce to the public the financial reports, which have been duly audited and certified by CPAs within four months following the close of each fiscal year. FSC proposes to shorten the period of four months to make earlier disclosure to the public.

5.2.2 Amending the Regulations of Financial Forecasts

The Authority promulgates the regulation, “Rules for Disclosure of Financial Forecasts by Public Company” to protect the informed right of investors. From December 2004, the FSC no longer requests public companies to disclose financial forecast when preparing for listing, or any significant change regarding business ownership, finance, and operation of company occurs. A public company may publish its financial forecast by summary financial forecast and complete financial forecast according the Rules voluntarily, and shall be disclosed on the “Market Observation Post System” （MOPS） website for market supervision purpose.

5.2.3 Information Disclosure Regarding Employee Bonuses

On March 30, 2007, the Authority issued an order (FSC Release No 0960013218) that required public companies to improve disclosures on employee bonuses information to better protect investors. The new disclosure requirement requested disclosure in a public company’s annual financial report, shareholders’ meeting handbook or TSE’s MOPS of the following information: 1. The exercise price of stock options of public listed companies should reflect the price changes caused by dividend paid or stock split. 2. Financial Statement attachments should reveal the flowing information: A. The Articles of Incorporation should reveal the employee bonus, and salary and rewards for directors and supervisors. Furthermore, it has to inform investors about information channels, which can provide meeting results from board of directors regarding the employee bonus and rewards for directors and supervisors. B. The following information should be disclosed: the methods used to calculate employee bonus and director’s rewards, the methods used to calculate shares of employee stock bonus, and the accounting practice for differentiates between the estimated amount and the actual amount of bonus. C. The actual amount of employee bonus, and salary and rewards for directors and supervisors from previous year should be disclosed. Differentiates between actual amount and estimated amount should be fully explained by the company. 3. Resolution from board of directors’ meeting regarding dividend policy and other related decisions should be post on M.O.P.S. and Proceeding of Paragraph. Those resolutions include: A. Dividend Policy: Resolutions regarding cash bonus, stock options, and reward for supervisors and directors. The differentiates between the actual amount and estimated amount listed as bonus should be explained B. Dividend policy made by meetings of shareholders, and meeting of board of directors should be disclosed. If any differentiate occurs between two resolutions, it should be fully explained.

5.2.4 Disclosure of Stakes above 5%

Although “Securities & Exchange Act” requires shareholders who acquire more than 10% of the total issued shares of a public company shall file a statement with the Competent Authority, not above 5%. The FSC had promulgated “Criteria Governing Information to be Published in Public Offering and Issuance Prospectuses” and “Criteria Governing Information to be Published in Annual Reports of Public Companies” to require the annual report shall list all shareholders with a stake of 5% or more, or shall list the top 10 shareholders, specifying the number of shares and stake held by each shareholder on the list. If the disclosed shareholder is juristic person and also be elected as a director of the board or a supervisor of the company, shall disclose their controlling shareholders. The annual reports and prospectus could be looked up and downloaded form the website: http://newmops.tse.com.tw.

5.2.5 Integrated Public Disclosure System

To strengthen the public disclosure system, amended company law approves that public companies disclose financial and non-financial information online instead of newspaper only. （ §28 Amended Company Law ） TSE & GTSM have already integrated the market monitoring and surveillance system. Currently, this system provides real-time stock trading information, related news, transaction data, alert, and financial business information of all the listed companies and securities dealers.

The Authority has already requested the TSEC and GreTai Securities Market to enhance the English version of “Market Observation Post System” for assisting foreign investors to get quick understanding about Taiwan Capital Market, also encouraged public companies to establish their own English websites and construct investors service area on their homepage to strengthen company information transparency.

5.3 Improving Accounting System of Public Companies

5.3.1 CPAs’ due Diligence Responsibility

The new amendment of the “Securities & Exchange Act” dated on April 28, 2004 aggravates criminal responsibility for failure to state a material truthfully in a company financial report due to failure to audit in accordance with applicable laws and regulations and generally accepted audit principles by a certified public accountant. Amendment 2005 describes more clearly to identify civil liability of securities issuer and any responsible person whose signature on the fraud or misrepresentation financial statement. (Article 20-1 of Securities & Exchange Act)

Except amending the regulations, the FSC continuing to strengthen the audit quality of the listed companies financial reports, and supervising CPAs’ audit quality by examining their working sheet. Any CPA who violates their responsibility, making false or misunderstanding in their audit report shall be punished, also, require the National Union of CPA Associations, R.O.C. to conduct “CPA Firms Rating System” to evaluate qualified CPA Firms.

The FSC drew up an amendment of CPA Law for enhancing the supervision of CPA firms, and adds more requirements for the independence of chartered accountants. Incorporating CPA partnership, aggravating the responsibility of the accountant misconducts, and constituting a National CPA Association to improve the CPA industry’s quality are the main issues of the amendment. Taiwan general accepted accounting principle adopted the international standards, in fact, there is no major difference between Taiwan Accounting Principles and International Accounting Standards. Besides, the FSC extend its supervisory power over the CPA firms that allow agents to exam certification CPA firms, and also create a notification system for CPA who refuses to make certification to restrain the possible misconducts of CPA and public companies as well.

5.3.2 Set Aside Losses on Sale of Non-Performing Loans as Special Reserve

Financial institutions sell non-performing loans to asset management companies and write off the losses in five years, when allocating surplus profits, in addition to the allocation for legal reserve required by law (§41 Securities & Exchange Act), the difference between losses on sale of non- performing loans and the amount written off shall appropriate as special reserve. The Authority also enunciated an order (SFC Release No.091006109) on December 10, 2002 to require financial institutes whose shares have been issued publicly shall disclose the amount of loss induced by non-performing loan disposal at “Market Observation Post System” in two days.

5.3.3 Accounting Principle of Employee Stock Option Plan

Currently, the accounting of employee stock option plan was adopted from the SFAS No. 123 of United States. The compensatory employee stock option plan of a company shall be record in compensation cost (expense), and the accounting principle shall adopt “Fair Value Method” or “Intrinsic Value Method”, however, adopt “Intrinsic Value Method” shall disclose Pro Forma Information.

FASB, U.S.A has announced a new guideline to require any company who intent to issue employee stock option shall adopt Fair Value Method to record in expense from 2005. Taiwan authority has already asked the “Accounting Research and Development Foundation” to research the possibility of adopting the same accounting measure in our country.

5.4 Improve Administrative Procedure of Tender Offer

Tender Offer is an effective market discipline mechanism for corporate governance. According to Article 43-1 of Securities & Exchange Act, any tender offer to purchase the securities of a public company shall file to the FSC instead of approval. The related regulation also introduces mandatory tender offer for avoiding effect stock price by large acquisition of shares. Any person who individually or jointly with another person(s) intends to acquire within 50 days shares accounting for 20 percent or more of the total issued shares of a public company shall employ a public tender offer.（Section 11 of Regulations Governing Tender Offers for Purchase of the Securities of a Public Company）.

5.5 Introducing More Institutional Investors to Engage the Corporate Governance

In order to change shareholders’ structure of local companies, the Authority opens the market for Foreign Institutional Investors and enlarges “securities investment consulting enterprise or securities investment trust enterprise” with the business of investment with full discretionary authorization, also encourages foreign and institutional investors to engage in the corporate governance supervision, and influence local enterprise to construct their own corporate governance policy.

The FSC announced enforcement letter No. 0930134921 on August 5, 2004 to approve the “Corporate Governance Best-Practice for Securities Investment Trust & Consulting Business” which promulgated by the “Securities Investment Trust & Consulting Association, R.O.C.” (SITCA). SITCA also amended the “Ethics Codes for Securities Investment Trust Fund Management” and the “Conduct Guideline for Securities Investment Consulting Business Professionals” for the above purpose. In addition, for enhancing the influence of institutional investors on public company’s corporate governance, the proxy rules promulgated by the FSC prescribes shareholders who has held 10% or more of the total number of issued shares of a public company, or any shareholder who support a candidate meets qualification of a independent directors for board election, or shareholders who has same opinion to the agenda of the meeting, may mandate a Investment Trust Company or a stock agent to act as a solicitor, and the number of shares to be represented shall not be restricted.

Furthermore, the FSC consider to corporate with Ministry of Economic Affair (MOEA) to amended Article 181 of the “Company Act” to allow institution shareholders adopting “dividable votes” which any institution shareholder would divide its vote into “agree”, “object”, and “default” to satisfy their investors’ will. The purpose of this amendment is encouraging institution shareholders to make more influence on major issues of shareholders’ meeting and candidates of the Board as well, also may induce the development of communication voting.

5.6 Orientations and Training of Directors and Supervisors

The regulator appointed SFI to provide orientation and continued training courses for all the new or experienced directors and supervisors. SFI provides practical training courses in the field of commercial laws, finance, and accounting practice to assist the board share a diversity of background, knowledge and experience. After taking courses, directors and supervisors will absorb related financial and legal knowledge for their benefits.

In order to improve Taiwan corporation management culture and international investors’ understanding, the SFI also established continuing education channel for board members, held international corporate governance seminars, and participate international forums regarding corporate governance to animate the concept of corporate governance.

5.7 Enhancing Internal Control and Audit Systems of Public Companies The Authority promulgates the regulation, “Criteria for Establishment of Internal Control Systems by Public companies” to require those public companies execute internal control and audit system. With conducting project audits of CPA, the regulator decides to strengthen the efficacy of internal control, and upgrade the quality of accounting information. To implement the functions of corporate internal audit plan, the authority follows up the Sarbanes-Oxley Act of 2002, United States and auditing standard No. 2 released by PCAOB and announces new amendments in 2005. The new amendment aims to enhance the reliance of financial statements by improving procedures to ensure that all financial statements comply with the Generally Accepted Accounting Principles and all transactions are approved in due course. Also, the authority requires public companies’ internal control procedure shall include “ related-party transaction management” and “procedures for preparing financial statements”. CPAs shall issue their opinion concerning companies’ internal control procedure and “supervision and management of subsidiaries”.

5.8 Encourage Companies to Implement Corporate Governance

The regulator also involved in improving the corporate governance environment of securities and futures intermediaries, lots of best-practice codes have been promulgated for intermediaries to improve their corporate governance since 2003. CSA, together with TSE and GTSM, jointly promulgated “Corporate Governance Best-Practice Principles for Securities Firms” in January 2003. (Full text of this best-practice principle can be read online at: http://www.csa.org.tw/downdoc/law/ Governance.doc). Securities firms shall follow these Principles to establish a sound corporate governance system. Future firms, securities investment trust and consulting business are also required to follow their own “Corporate Governance Best-Practice Principles”. Other financial industries also establish their own best-practice principles of corporate governance under the suggestion of their own administration, such as, “Corporate Governance Best-Practice Principles for Financial Holding Companies”, “Corporate Governance Best-Practice Principles for Banks”, and “Corporate Governance Best-Practice Principles for Insurance Companies”.

By exercising the pressure through market mechanisms, the Authority expects to guide companies to establish good corporate governance and to implement the Taiwan Corporate Governance Code. For the purpose mentioned above, the Authority established a “Corporate Governance Bulletin board” on its website (http://www. sfb.gov.tw/) to provide the related regulations, guidelines, and FAQ for the public. Moreover, the Authority require related SROs should establish “corporate governance section ” on their website to promote the concept and principles. Following are the websites’ IP for reference: 1. Securities & Futures Institute: http://www.sfi.org.tw/Corporate_ Governance 2. Taiwan Securities Exchange: http://www.tse.com.tw/ch/listed/governance/cg_10.php 3. GreTai Securities Market: http://www.otc.org.tw/ch/regular_emerging /corporate _governance.php 4. Chinese Securities Association: http://www.csa.org.tw/A001/A021.asp

5.9 Enact “Securities Investors and Futures Traders Protection Law”

As mentioned above, the SFI is a quasi-public organization for research, training and protecting investors. To enhance the protection of investors, the SFI formally set up an “Investor Service and Protection Center” in March 1998. This Center has initiated a number of activities regarding the protection on investor rights and lodged complaints or filed charges on behalf of the general investors. In June 1991, the SFI raised a sum of NT$30 million and established a fund for public litigation against egregious violation of Securities Law. The SFI will exercise its own minority shareholder right pursuant to the Companies Law or bring de facto class actions as agents for other claimants. To support the legal basis of protecting investors, the “Securities Investors and Futures Traders Protection Law” was enacted in 2002. The Law was passed by parliament in July 2002. The most important part in the law is the enhancement of mechanisms for securities class action, which figures out the absence of class-action lawsuits. Moreover, the law will authorize the establishment of an investor protection foundation. Securities and Futures Investors Protection Center (SFIPC), established on January 22, 2003 in accordance with the Securities and Futures Investors Protection Law, provides consulting, mediation, class-action lawsuits, compensation and other related services to investors.

According to Article 28 of the Act, the protection institution may bring an action or submit a matter to arbitration in its own name with respect to a single securities or futures matter injurious to a majority of securities investors or futures traders, after having been so empowered by not less than 20 securities investors or futures traders. The securities investors or futures traders may withdraw the empowerment prior to conclusion of oral arguments or examination of witnesses and shall provide notice to the court or arbitration tribunal. Up to January 12, 2005, adopted 20 compensation claim cases, and filing 17 of them to the court. Accumulated 20,614 investors registered, and the compensation amounts to NT$ 10.75 billion. In addition, according to Article 41 of the “Civil Litigation Law”, persons who involved in the same issue shall decide one or more plaintiffs to acting as a procurator for this claim, that is, our legal system permit shareholder to file a class-action lawsuit. For more information regarding the Investor Service and Protection Center, please refer to the official website at: http:www.sfipc.org.tw/index.htm

5.10 The Investigation and Enforcement Power of Securities Authority

The “Securities & Exchange Act” authorized the authority to execute investigation and administrative sanction for violating laws cases, and also, rule criminal disposition. In addition, Article 5 of the “Organization Act of Financial Supervisory Commission, Executive Yuan” prescribe the FSC may request any financial institution and its affiliated persons to provide their account books, documentation, and computer files, or inform all examinee report to the appointed office for further interpellation. If any criminal suspect involved, the FSC may acquire the permission of the prosecutor and apply a search warrant from the court for further investigation. As a matter of fact, the establishment of the FSC enhances the power of investigation and enforcement.

Regarding the manpower for violation investigation, there are about 170 people from TSE & GTSM to assist competent authority to monitor market transactions. In addition, any violation involved criminal activity shall be taken over by jurist department. There are more than 2,500 professionals from the “Bureau of Investigation Ministry of Justice” and about 1,000 prosecutors devote to the related investigation.

Rigid civil law approach makes it a barrier to file a lawsuit against directors and supervisors. Disqualified or unlawful directors and supervisors actually do not worry about the lawsuit since the proceeding will last for years. For example, the Company Law allows institutional or government shareholders to appoint their representatives as directors and supervisors, and this inherent conflict of interests essentially against the rules that a supervisor shall not concurrently be the director of the company, with the result, the affiliation between supervisor and major shareholders has weakened their functions. Taiwan government is aware of the defects of the system function, and currently engaging in the following issues to rectify Taiwan corporate governance. To make an easier filing of derivative lawsuit, the amended company law recently has loosened the criteria. Any shareholder owning 3% of a company’s share over a year, instead of 5%, may petition supervisor to sue directors. If the supervisor fails to do so within 30 days, the same shareholder may file the lawsuit for company’s interest.（§214 of Company Law）

Article 181-1 of Securities & Exchange Act requires jurisdiction system to constitute a professional court to examine the market criminal suspects for assuring the trial is under the verdict of a judger who owns knowledge of securities market and economic criminals. Appendix I List concerning what information Public companies should announce to the public or report to the FSC

Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing I. Items to be handled 1Financial and insurance enterprises Must input relevant information into None 1Item 1 and 4 of Article 36 of the on a regular basis the Market Observation Post System Securities and Exchange Law and 1 Operating revenue (MOPS) prior to the tenth day of the Article 5 of the Enforcement Rules of 1 Monthly sales following month the Securities and Exchange Law revenues 2 Operating expenses 2 Securities and Futures Commission, Ministry of Finance (1) Document 2 Other listing companies on the TSEC and No. 08842, August 10, 1988 GTSM 3 Securities and Futures Commission, 1 Invoice income Ministry of Finance (6) Document No. 003888, August 10, 1991 2 Operating revenue 4 Securities and Futures Commission, Ministry of Finance (1) Document No. 0910003639, June 28, 2002

5 Securities and Futures Commission, Ministry of Finance (6) Document No. 0910004197, August 6, 2002

6 Securities and Futures Commission, Ministry of Finance (6) Document No. 0910006432, December 31, 2002 2 Monthly The amount of endorsement and guarantee Must input relevant information into None 1 Article 36-1 of Securities and Endorsement and MOPS prior to the tenth day of the Exchange Act. Guarantee following month 2 "The Guidelines for the Lending of Capital, Endorsements and Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

Guarantees by Public Companies"

3 Securities and Futures Commission, Ministry of Finance (I) Document No.0910003639of June 28, 2002. 3 Monthly capital The amount of capital lending Ditto None 1 Article 36-1 of Securities and lending Exchange Act.

2 "The Guidelines for the Lending of Capital, Endorsements and Guarantees by Public Companies"

3 Securities and Futures Commission, Ministry of Finance (I) Document No.0910003639of June 28, 2002. 4 Information about Capital amount engaged in derivative instrument Ditto None 1 Article 36-1 of Securities and derivative transactions Exchange Act. instrument transactions 2“Guidelines for Handling Acquisition and Disposal of Assets by Public Companies”

3.Financial Supervisory Commission (1) Document No0940001484, April 8, 2005. *5 Q1 financial report 1 Quarterly financial report reviewed by CPAs 1 Must transmit it to the MOPS in ＊1 Taiwan Stock 1 Item 1 and 4 of Article 36 of the electronic file format and file it to Exchange Securities and Exchange Law Q3 financial report 2 Quarterly Consolidated financial report this commission in paper file reviewed by CPAs（Apply to financial format within one month of the ＊2 GreTai Securities 2 Securities and Futures Commission, holding companies and Holding companies ） end after the first and third quarters Market Ministry of Finance (6) Document of each business year No. 01468, August 4, 1994 3 Case checklist 2Companies whose stocks are traded 3 Securities and Futures in the Emerging Market or whose Institute 3 Securities and Futures Commission, 4 A company that has published its complete stocks are no yet listed on TSE or Ministry of Finance (1) Document financial forecast ，analysis of the reasons for GTSM are exempted from making No. 0910003639, June 28, 2002 a discrepancy of 20 percent or more between public announcements and filing Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

actual and forecast income before taxes , and, reports except the bank, insurance or 4 Securities and Futures Commission, if the financial forecast was reviewed by a securities subsidiaries of the Ministry of Finance (6) Document CPA, also shall have a CPA’s opinion . financial holding companies. No. 0910006432, December 31, 2002 5Certification 3Quarterly Consolidated financial report Must transmit it to the MOPS 5 Securities and Futures Commission, in electronic file format and file it to Ministry of Finance (6) Document this commission in paper file format No. 091000549, February 11, 2003 within one month or 45 days of the end after the first and third quarters 6 Securities and Futures Commission, of each business year. Ministry of Finance (1) Document No. 0910112978, April 23, 2003

7.Securities and Futures Commission, Ministry of Finance (6) Document No0910006430, December 31,2002

8.Financial Supervisory Commission (6) Document No0940001071, March 8, 2005.

9.Financial Supervisory Securities (6) Document No. 0930005938of December 9, 2004.

10 Securities and Futures Commission, Ministry of Finance (6) Document No. 0950001436, March 24, 2006 6 Half-yearly 1 Half-yearly financial report audited by CPAs 1Must transmit it to the MOPS in ＊1 Taiwan Stock 1 Item 1 and 4 of Article 36 of the financial report electronic file format and file it to Exchange Securities and Exchange Law 2. Financial holding companies and Holding this commission in paper file format companies Half-yearly Consolidated within two months of the end of each ＊2 GreTai Securities 2 Securities and Futures Commission, financial report audited by CPAs, other half-business year. Market Ministry of Finance (6) Document companies Half-yearly Consolidated No. 01468,August 4, 1994 financial report reviewed by CPAs. 2.Financial holding companies Half- yearly Consolidated financial report 3Securities and Futures Must transmit it to the MOPS in Institute 3 Securities and Futures Commission, Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

3Minutes of Board Meeting electronic file format and file it to Ministry of Finance (1) Document this commission in paper file format No. 0910003639, June 28, 2002 4 Report recognized by the supervisors within two months of the end of each half-business year. 4 Securities and Futures Commission, Ministry of Finance (6) Document 5 Case checklist 3.Other companies Half-yearly No. 0910006432, December 31, Consolidated financial report Must 2002 6 A company that has published its complete transmit it to the MOPS in electronic financial forecast ，analysis of the reasons for file format and file it to this a discrepancy of 20 percent or more between commission in paper file format 5 Securities and Futures Commission, actual and forecast income before taxes , and, within two months or 75 days of the Ministry of Finance (6) Document if the financial forecast was reviewed by a end of each half-business year. No. 091000549, February 11, 2003 CPA, also shall have a CPA’s opinion . 6 Securities and Futures Commission, Ministry of Finance (1) Document 7Certification No. 0910112978, April 23, 2003

7 Financial Supervisory Commission (6) Document No0930154140, December 16,2004

8 Financial Supervisory Commission (6) Document No0940001317, March 29, 2005

9 Financial Supervisory Commission (6) Document No0940001468, April 8, 2005

10Financial Supervisory Commission (6) Document No0940001071, March 8, 2005

11.Financial Supervisory Securities (6) Document No. 0930005938of December 9, 2004. Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

11 Securities and Futures Commission, Ministry of Finance (6) Document No. 0950001436, March 24, 2006 Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing 7 Yearly financial 1 Yearly financial report audited by CPAs 1 Must transmit it to the MOPS in *1 Taiwan Stock 1 Item1 and 4 of Article 36 of the report electronic file format and file it to Exchange Securities and Exchange Law 2 Consolidated financial statement this commission in paper file format within four months after the *2GreTai Securities 2 Securities and Futures Commission, end of each business year Market Ministry of Finance (1) Document 3 Minutes of Board Meeting No. 01081, June 1, 1991 2 Public announcement and filing 3Securities Exchanges 4 Report accepted by supervisors must not be postponed by any Securities and 3 Securities and Futures Commission, reason. Futures Institute Ministry of Finance (6) Document 5 Case checklist No.03363, December 7, 1991

6A company that has published its complete 4 Securities and Futures Commission, financial forecast ，analysis of reasons for a Ministry of Finance (1) Document discrepancy of 20 percent whose amount is No.01680, July 12, 1993 equal to or over 0.5 percent of paid-in capital and NT30,000,000 between actual and forecast 5Securities and Futures Commission, income or un-audit income before taxes , and, Ministry of Finance (6) Documents if the financial forecast was reviewed by a No. 04448 and 04449, November CPA, also shall have a CPA’s opinion . 30, 1999

7Consolidated financial statement for parent and 6 Securities and Futures Commission, affiliated companies Ministry of Finance (1) Document No. 0910003639, June 28, 2002 8Certification 7Securities and Futures Commission, Ministry of Finance (6) Document No. 0910006432, December 31, 2002

8 Securities and Futures Commission, Ministry of Finance (6) Document No. 091000549, February 11, 2003

9 Securities and Futures Commission, Ministry of Finance (1) Document No. 0910112978, April 23, 2003

10Financial Supervisory Securities (6) Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing 8 Changes to share The changes to share ownership, arranged 1The company should input 1 Article 25 of the Securities and ownership and pledge and annulled pledge of the company's information regarding the changes Exchange Law pledged rights board directors, supervisors, managers, and of shares held by internal company None shareholders holding 10 percent or more of the personnel during the previous th 2 Securities and Futures Commission, company's stocks (referred to as internal month into MOPS, prior to the 15 Ministry of Finance (2) Document company personnel) day of each month. No.08954, August 26, 1988 (Reports should be submitted by: directors of the 2 If a pledge is arranged, the board, supervisors, managers, and shareholders arranging party should input 3 Securities and Futures Commission, holding more than 10 percent of the company's relevant information into the Ministry of Finance (3) Document stocks, including their spouses, under-age MOPS within five days, and No.001191, February 8, 2002 children and nominal third party holders. This transmit a summary report in an also applies to representatives appointed by the electronic file to the MOPS before 4 Securities and Futures Commission, government or corporate shareholders and their the 15th day of each month. The Ministry of Finance (3) Document spouses, children or nominal third party same is valid for annulled pledges. No.107897, March 15, 2002 shareholders) 5 Securities and Futures Commission, Ministry of Finance (1) Document No.0910003639, June 28, 2002 9.Information about 1 Written meeting notification 30days prior to a shareholders None Article 5 、 6 of the Regulations shareholders meeting, or 15days prior to a special Governing Content and meetings shareholders meeting, shall transmit Compliance Requirements for 2 Paper to be used for proxy meeting notification、Paper to be used Shareholders Meeting for proxy、main points of proposals Handbooks of Public 3 main points of proposals and description and description in an electronic file to Companies Market Observation Post System. 4 Shareholders Meeting Handbooks

5 Complementary meeting materials Shareholders meeting (including regular and special meetings) shall transmit shareholders meeting handbook and Complementary meeting materials in an electronic file to Market Observation Post System. 10. Matters regarding 1.38days prior to a shareholders 1 Article 25-1 of the Securities and calls for proxies meeting, or 23days prior to a special Exchange Law shareholders meeting, the solicitor Summarize the solicited materials for the shall send the solicited materials to 1 The filing of publicly （1）Summarize the solicitor the solicited companies, and submit announced in 2 Item 1,2, Article 7 of "Rules Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing copies to the Securities and Futures materials of Institute. newspapers, could be Governing the Use of Proxies for Public omitted Attendance at Shareholders Meetings announcements 30 days prior to a shareholders of Public Companies” for solicitor meeting, or 15 days prior to a special shareholders meeting, the 2 Copies of the company shall compile the Solicitor solicitor's forms for 3 Securities and Futures Commission, Solicitation Information and material solicitation Ministry of Finance (3) Document transmit it in an electronic file for shall be submitted to No.0920001124, March 19, 2003 disclosure by the Securities and the Securities and Futures Institute, or shall publicly Futures Institute. announce it in a daily newspapers for two consecutive days.

2.If any change in the agenda of the shareholders meeting occurs from the date of expiry of the period for submission by the solicitor of the solicitation information pursuant to the preceding paragraph to the date of mailing of the shareholders meeting notice, the company shall immediately notify the solicitor with a copy to the Securities and Futures Institute and shall prepare an electronic file of the solicitation information as revised by the solicitor on the basis of the changed agenda and transmit to the Securities and Futures Institute for disclosure. （2）Submit the A detailed summary form about proxies On the day of the shareholders None 1 Article 25-1 of the Securities and report of information meeting, the public company or its Exchange Law materials agent for stock affairs shall compile a obtained by the statistical statement of the number of solicitor shares obtained by the solicitor 2Article 12 of "Rules Governing the through solicitation and transmit it to Use of Proxies for Attendance at the Securities and Futures Institute in Shareholders Meetings of Public electronic file format, and shall make Companies” an express disclosure of the same at the site of the shareholders meeting. Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing （3）Submit report A detailed summary form shall be compiled of On the day of the shareholders None 1 Article 25-1 of the Securities and on non-solicited non-solicited proxies authorizations for meeting, the public company or its Exchange Law authorized representation agent for stock affairs shall compile a representation statistical statement of the number of materials shares represented by the consigned 2 Item 3, Article 13 of " Rules agent transmit it to the Securities and Governing the Use of Proxies for Futures Institute in electronic file Attendance at Shareholders format, and shall make an express Meetings of Public Companies” " disclosure of the same at the site of the shareholders meeting. 11.Annual report Annual report 1 Annual report should be distributed ＊1 Taiwan Stock 1 Paragraph 3 and 4, Article 36 of the to shareholders at regular meetings Exchange Securities and Exchange Law of shareholders ＊2 GreTai Securities 2 Securities and Futures Commission, 2 Electronic files should be sent to the Market Ministry of Finance (1) Document MOPS prior to a shareholders No. 100116, January 3, 2000 meeting. 3 Securities and Futures Institute ３ Securities and Futures Commission, Ministry of Finance (1) Document No. 00371, February 1, 2000

４ Securities and Futures Commission Ministry of Finance (1) Document No. 000536, March 2, 2001

５ Securities and Futures Commission Ministry of Finance (1) Document No. 0910003639, June 28, 2002

６ Securities and Futures Commission Ministry of Finance (1) Document No. 0920112978, April 23, 2002 12. Status of internal Details-“Ｓ standards for publicly Held 1 Before the end of January each year, None 1 Securities and Futures Commission, audit execution Companies to Establish Internal Control Resumes of internal auditors should Ministry of Finance (1) Document Systems ” be summarized and transmitted in No.003639, June 28, 2002 an electronic file to MOPS for this commission’s reference 2 Securities and Futures Commission, Ministry of Finance (audit) 2 Within two months following the Document No.005805, November Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

end of each fiscal year, the status 18, 2002 of the execution of the audit plan for the previous year shall be transmitted in an electronic file to MOPS for this commission’s reference.

3 Within five months following the end of each fiscal year, the status of improvements to internal control deficiencies or abnormalities discovered by the previous annual internal audit shall be transmitted in an electronic file to MOPS for this commission’s reference

4 Prior to the end of each fiscal year, the audit plan for the following year shall be transmitted in an electronic file to MOPS for this commission’s reference.

5 Prior to the tenth day of the following month, changes to the internal audit supervisor shall be approved by the board of directors and transmitted in an electronic file to MOPS for this commission’s reference

6.TA company applying for initial public shall designate the certified public accountants to do the special audit for the effectiveness of the design & implementation of the internal control system and provide the audit report to this commission. Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing 13. The status of the Internal Auditors' report Attached to the previous item, status None 1. “Guidelines for Handling internal audit of the internal audit execution, and Acquisition and Disposal of Assets execution for filed in the Commission by Public Companies” companies engaged in derivative 2 Securities and Futures Commission, instrument Ministry of Finance (1) Document transactions No.0910003639, June 28, 2002 14.Internal control Internal control declaration Within four months following the end None １ Securities and Futures Commission, declaration of each fiscal year, the internal control Ministry of Finance(1)Document declaration shall be transmitted in an No.0910003639,June 28.2002 electronic file to MOPS for this commission reference ２ Securities and Futures Commission , Ministry of Finance (audit)Document No.0910005805,November 18,2002

３ Securities and Futures Commission Ministry of Finance(audit)Document No.092001833,April 30,2003.

4 Item1, Article 24 of “Standards for Public Held Companies to Establish Internal Control Systems”.

5 Item 2,Article 23of “Criteria for the Establishment of Internal Control Systems By Securities and Futures Service Enterprises” 15.The shareholders’ announcement of the shareholder’s table The company should make an None Article 172-1 of the Company Law rights of table motions、the place and the period to deal with announcement including the motions those motions shareholder’s table motions、the place and the period to deal with those motions before the book closure date. And also, the period, which we mention above, must be no less than 10 days. Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing 16.The system of Announcement of the directors or supervisors 1.The company which adopts the None Article 192-1 and 216. -1 of the nominates the nominating Company Law directors and nominate regulations should make supervisors. an announcement including the directors or supervisors nominating period、the nominating number、the nominating place 、 and other necessary items. And also, the period, which we mention above, must be no less than 10 days.

2.The company should make an announcement about the list of the nominees and their academic background, past experience, the number of their shareholdings, the name of the government or corporation which they represent and other related information. The announcement has to be made no later than 40 days prior to a regular shareholder meeting date（25 days prior to a special meeting date） II. Non-regular 1 Check returned due to insufficient funds, credit Input information into the MOPS None 1 Article 36-3 and 36-4 of the matters: refused, or other loss of creditworthiness. within two days of date after the Securities Exchange Law. occurrence. 1. An incident 2 Litigious, non-litigious cases, administrative 2 Articles 7 of the Enforcement Rules sufficient to affect disciplinary action, administrative suit, of the Securities and Exchange stock prices and security procedures or compulsory execution Law. stockholders’ has a severe impact on the company’s finances equity. or business. 3. Securities and Futures Commission, Ministry of Finance (1) Document 3 A severe production drop, complete or partial No.0910003639, June 28, 2002 work stoppage, leasing out of company plant or major equipment, or mortgage of divided assets in entirety or major part severely affects company’s operations.

4 One of the circumstances listed in Paragraph 1, Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

Article 185 of the Company Law occurs.

5 A court has ruled in accordance with Article 287-1-5 of the Company Law that the company’s stock may not be transferred.

6 There is a change of president, general manager, or at least one-third of directors.

7 Change of attesting CPA. Not applicable if the cause of change was internal changes in the accounting firm.

8 Signing, revision, termination or dissolution of important memorandum, important contract, or strategic alliance or other joint business project; change in major content of business plan; successful development of trial product and start of mass production stage; purchase of other business; acquisition or sale of patent, exclusive trademark rights, copyright, or other intellectual property rights has a severe impact on the company’s finances or business.

9 Other major circumstances affecting company’s continued operations. 2 The Commission has Matters listed in Article 252 or Article 273 of the Must input relevant information into None 1Article 252 and Article 273 of the approved for offering Company Law. the MOPS within 30 days after Company Law. and issuing of receiving notification of approval securities. from this Commission 2 Article 9-1-1 and Article 9-1-3 of “Criteria Governing the Handling （1）announcement Offering and Issuance of Securities by Securities Issuers.”

3 Securities and Futures Commission, Ministry of Finance (I) Document No.0910003639 of June 28, 2002 Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing （2）Proof of full Relevant information regarding the restricted 1 Input information regarding the 1.Article 9-1-2 of “Criteria Governing receipt of price bank account. bank, date into the MOPS within the Handling Offering and Issuance in a restricted two days of date after the signing of Securities by Securities Issuers.” bank account. the contract occurrence 2 Securities and Futures Commission, 2 Payment may be made by the issuer Ministry of Finance (I) Document or funds raiser only after a bank has No.0910003639 of June 28, 2002 received the full price in a restricted account, and information regarding receiving the full price must be input into the MOPS. 3 In case the issuer must notify this Commission of each disbursement, application letter must be sent to this Commission for reference prior to each disbursement （3）Payment of Transfer of payment certificate and payment of Relevant information must be input None 1 Article 34 of Securities and stocks or stocks or corporate bonds to subscribers or into the MOPS within the day after Exchange Law. corporate applicants. receiving notification of approval bonds. from the Ministry of Economic 2 Articles 9-1-3 of “Criteria Governing Affairs. the Handling Offering and Issuance of Securities by Securities Issuers.”

3 Securities and Futures Commission, Ministry of Finance (I) Document No.0910003639 of June 28, 2002 Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing （4）Implementati Quarterly report of cash capital increase of 1. Within one day after receiving None 1 Article 9-1-5~7 of “Criteria on status of public offering company or corporate bond fund notification of approval from this Governing the Handling Offering cash capital raising plans and fund utilization status. Commission, information regarding and Issuance of Securities by increase or basic data, offering status, project Securities Issuers.” corporate items, and scheduled progress bond fund should be input into MOPS.2. raising plan. Within 10 days after the end of each 2 Securities and Futures Commission, quarter, the quarterly report on “the Ministry of Finance (I) Document plan for capital increase by cash No.00574 of February 8, 1999. injection or corporate bond issuance and capital utilization" shall be ３ Securities and Futures Commission, input into MOPS. Ministry of Finance (I) Document No.091000363 of June 28, 2002. 2. Where the capital raised by a TSE- listed and /GTSM-listed company has been restricted by this Commission for specific purpose(s), within 10 days after the end of each quarter.

3.Where a listed or OTC company conducts a cash capital increase or corporate bond issue, it shall contact the original underwriter or the certifying CPA to comment on the reasonableness of the progress made regarding capital utilization and of the purposes for unused capital, and on whether there has been any departure from the capital utilization plan, and within 10days after the end of each quarter shall post this information together with the information referred to in the preceding subparagraph to the information reporting website specified by the FSC. （5）Change in 1 Minutes of board meeting. 1 Relevant information shall be input 1 Article 9-1-9 of “Criteria Governing cash capital into the MOPS within two days of the Handling Offering and Issuance increase or 2. Letter of consent from competent authorities passing by board of directors and None of Securities by Securities Issuers.” corporate in charge of target industry. (Only if submitted to stockholders’ meeting bond fund available) for confirmation afterward. 2 Article11-1-6 of “Criteria Governing Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing raising plan. 3 Assessment opinions of original primary ＊2 In accordance with Taiwan Stock the Handling Offering and Issuance underwriter (only if available) Exchange or GreTai Securities of Overseas Securities by Securities Market Regulations, TSE- listed Issuers.” and GTSM- listed companies must hold a major explanatory press conference on the first business 3 Securities and Futures Commission, day after the board discusses and Ministry of Finance (I) Document revises the plan, and must enter the No.03693 of December 22, 1998. plan together with an abstract of the assessment opinions of the 4 Securities and Futures Commission, original primary underwriter on the Ministry of Finance (I) Document MOPS within two days of public No.138830 of August 1, 2001. announcement. From that time on, TSE- listed and GTSM- listed companies shall input into MOPS 5. Securities and Futures Commission, the original primary underwriter ‘s Ministry of Finance (I) Document opinions concerning the No.0910003639 of June 28, 2002. reasonableness of the uses of funds not disbursed and fund implementation timetable together with “Public Offering Company Cash Capital Increase or Corporate Bond Issue Plan and Fund Utilization Status Quarterly Report” within ten days after the end of each quarter. （6）Information 1Actual issuance proceeds, maturity, interest rate 1. Within two days of the completion None 1 Article 9-1-5, Article 9-2,and Article of corporate and repayment methods. of the funds offering and prior to 25 of “Criteria Governing the bonds the tenth day of each month during Handling Offering and Issuance of issuance 2 any change to the filed material for the first the issuance period of the Securities by Securities Issuers.” issuance of corporate bonds occurring within corporate bonds, information the scheduled issuance date in the event the related to the issuance of the 2. Securities and Futures Commission, issuer conducts a shelf registration to issue corporate bonds shall be input into Ministry of Finance (1) Document corporate bonds, the MOPS. No.0910003639, June 28, 2002 2. Any change to the filed material for the first issuance of corporate bonds occurring within the scheduled issuance date shall be input into the MOPS. Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing （7）Status of Issuers must quarterly disclose the Information shall be input into the None 1 Article 14-4, Article 37-3 and Article requests for amount of new shares issued under MOPS within 15 days after the end of 49-3of “Criteria Governing the conversion requests for conversion (corporate bonds) each quarter. Handling Offering and Issuance of (corporate and requests for exercising the warrant or option Securities by Securities Issuers.” bonds) and (bonds with warrants and preferred stocks with requests for warrants,) exercising the 2.Securities and Futures Commission, warrant or Ministry of Finance (1) Document option(bonds No.0910003639, June28, 2002 with warrants and preferred stocks with warrants,)  （8）Status of issuance of overseas securities.

item reported jointly： Table of funds utilization plan and status of The issuer shall post the information None Article 11-3-3 and 11-3-4 of Ⅰ the funds funds utilization to the reporting website specified by “Regulations Governing the Offering utilization the FSC as follow: and Issuance of Overseas Securities by plan and the Issuers.” status of 1. Within ten days after the end of funds each quarter posting the funds utilization utilization plan and the quarterly report on the status of funds utilization.

＃ 2.A company listed on a securities exchange or traded on an OTC market shall, on a quarterly basis, request the original securities underwriter or CPA to prepare an evaluation opinion on progress in implementation of the funds utilization plan, the legitimacy of the purpose of the unused funds, Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

and a statement concerning whether there has been any change to the plan. Within ten days after the end of each quarter, the issuer shall post such opinion together with the information referred to in the preceding subparagraph to the information reporting website specified by the FSC. Ⅱ a change to 1.The change of funds utilization plan 1.The issuer shall register an None Article 11-1-6 of “Regulations the funds amendment of the plan and, within Governing the Offering and Issuance utilization two days after the amendment is of Overseas Securities by Issuers.” plan, 2. Requesting the original underwriter to issue approved by a resolution of the an evaluation opinion on the progress of board of directors, the issuer shall implementation of the funds utilization plan make a related public announcement and the legitimacy of the purpose of the unused via the information reporting website specified by the FSC. The issuer shall also submit the change to a shareholders meeting for confirmation.

2.Where the funds utilization plan is amended, the issuer shall, upon such change and within ten days after the end of each subsequent quarter, also request the original underwriter to issue an evaluation opinion on the progress of implementation of the funds utilization plan and the legitimacy of the purpose of the unused. Ⅲ strategic investors The subscription list and individual subscription If the underwrite plan has not yet None Article 11-2 of “Regulations or overseas securities prices and quantities, been fully executed, （ Before Governing the Offering and Issuance subscribed by specific disclosing day ） Disclosing in the of Overseas Securities by Issuers.” persons, prospectus and posting this information to the information reporting website designated by the FSC. Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing item reported 1. Total dollar amount, unit price, volume, and The issuer shall, within two days after Article 19 of “Regulations Governing separately： issue date of the overseas depositary receipts signing a deposit contract, make a None the Offering and Issuance of Overseas issue; provided, however, that if the overseas public announcement on the Securities by Issuers.” depositary receipts are for conversion of information reporting website Ⅰ Overseas depositary overseas corporate bonds, the issuer may opt specified by the FSC. After the receipts to announce only the estimated number of announcement of the items referred to units to be issued; in the preceding paragraph, should a. Basic information there be any change to any of these 2. The number of shares of the underlying items, a public announcement of such securities and their unit price; provided, change shall be made within two days however, that if the overseas depositary after the closing of the offering. receipts are for conversion of overseas corporate bonds, the issuer may opt to announce only the estimated number of shares;

3. Place of issuance and transaction;

4. The issuer's reason for arranging for subscription by the specific person(s), the total number of units subscribed to by the specific person(s), total dollar amount, and the relationship between the specific person(s) and the issuer (the statement of issuance methods provides that a portion of the depositary receipts shall be subscribed to by specific person or persons);

5. The proceeds plan and the expected returns (where the issuer is sponsoring issuance of overseas depositary receipts through cash capital increase);

6. The name of the company involved in such acquisition or share exchange, the number of shares involved, the schedule for implementation and completion of the plan, the expected returns, the share exchange ratio, the method (and legitimacy thereof) for Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

determining the value of the overseas depositary receipts for which the issuer is to sponsor issuance, and the method (and legitimacy thereof) for determining the value of the assets to be acquired by the issuer (the above disclosures are to be made where the issuer intends to acquire a foreign company, to acquire the shares of a foreign company, or to issue new shares for the purpose of an acquisition or split of a foreign company conducted in accordance with the law);

7. The primary impact on shareholders' equity (e.g. expenses incurred by the issuer in sponsoring issuance of the overseas depositary receipts, impact on shareholding structure, etc.). ｂ. The 1.A prospectus prepared in accordance with the The issuer shall submit the documents None Article 20 of “Regulations Governing documents, securities acts and regulations of the country mentioned within ten days after the Offering and Issuance of Overseas the issuer where the offering took place; provided, issuance of the overseas depositary Securities by Issuers.” shall submit however, that these requirements do not apply receipts, If an issuer sponsoring to the FSC to the issuance of overseas depositary receipts issuance of overseas depositary for for conversion of or subscription to overseas receipts is required by a deposit recordation corporate bonds; contract to provide any information to after a depositary institution, within three issuance of days after providing such information the overseas 2.a duplicate copy of the deposit contract; the issuer shall report such provision depositary to the FSC for recordation. receipts 3.a duplicate copy of the custody contract;

4.an opinion letter in Chinese issued by an ROC attorney-at-law confirming that there is no material discrepancy between the issuance rules and the particulars of the issuance as set forth in a registration that the FSC has allowed to become effective, or in an application that the FSC has approved;

5.documentary evidence providing proof of Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

deposit of funds collected in full;

6.a list of those whose subscriptions account for 10 percent or more of the total value of the issue as well as the individual subscription prices and quantities thereof;

7.other documents required by the FSC. ｃ.The A Statement of Outstanding Balance of Overseas After the issuance, the sponsor shall None Article 21-1 of “Regulations documents, Depositary Receipts and Securities Represented post separately, both by the 20th day Governing the Offering and Issuance the issuer Thereby and within five days after the end of of Overseas Securities by Issuers.” shall submit each month, to the information to the FSC for reporting website specified by the recordation FSC, and shall also submit a report to monthly; the competent authority for foreign exchange business for recordation ｄ.The The total dollar amount of the overseas In the event that the sponsor carries None Article 21-2 of “Regulations documents, depositary receipts, total units, and the number out a cash capital increase through a Governing the Offering and Issuance the depositary of the underlying securities, new share issue, a new share of Overseas Securities by Issuers.” institution distribution from earnings, or a new issues share distribution from capital additional reserve, and the depositary institution overseas issues additional overseas depositary depositary receipts in a corresponding amount receipts, the pursuant to Article 14, paragraph 1, issuer shall subparagraph 2, the sponsor shall, submit; within two days after issuance of the overseas depositary receipts, report to the competent authority for foreign exchange business, and shall post the relevant information to the information reporting website specified by the FSC. ｅ.others Where the issuer is sponsoring issuance of The issuer shall, on a quarterly basis None Article 11-1-5 of “Regulations overseas depositary receipts through capital for the first year following completion Governing the Offering and Issuance increase, and its purpose in so doing is to of registration, post to the information of Overseas Securities by Issuers.” acquire a foreign company, acquire the shares of reporting website specified by the a foreign company, or sponsor issuance of new FSC. shares for the purpose of an acquisition or split Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing of a foreign company conducted in accordance with the law, the issuer shall request the original underwriter to prepare an opinion evaluating the impact of such matters upon the issuer's financial operations, business operations, and shareholders' equity. Ⅱ Overseas 1. Total dollar amount of the offered overseas After the registration becomes None Article 26 of “Regulations Governing corporate corporate bonds, the face value of each bond effective or approval of application is the Offering and Issuance of Overseas bonds certificate, the issue price, and the projected granted, the issuer shall, within two Securities by Issuers.” date of issuance; days after pricing the offering, publicly announce the following a. Basic matters on the information reporting informatio 2. Interest rate(s) for the overseas corporate website specified by the FSC: After n bonds to be offered; the announcement of the items referred to in the preceding paragraph, 3. Repayment method and term of maturity of should there be any change to any of the overseas corporate bonds to be offered; these items, a public announcement of such change shall be made within two days after the closing of the offering. 4. Type of security (where the bonds are secured);

5. Conversion terms and important stipulations (where the issuance rules provide for conversion);

6. Method of warrant exercise and important stipulations (where the issuance rules set forth warrant exercise conditions)

7. Place of issuance and transaction;

8. The reason why a specific person(s) is being contacted to subscribe through negotiation (in the event that such is the case), the total number of certificates to be subscribed to by the specific person(s), the total dollar amount thereof, and the relationship between the specific person(s) and the issuer; Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

9. A funds utilization plan, and a statement of the expected benefits thereof;

10. The principal impact on shareholders' equity. ｂ. The 1. A prospectus prepared in accordance with the After the registration becomes None Article 27 of “Regulations Governing document securities acts and regulations of the country effective or application of approval is the Offering and Issuance of Overseas s, the in which the bonds are offered; granted, the issuer shall submit the Securities by Issuers.” issuer documents mentioned to the FSC shall within ten days; Any information that submit to 2. A duplicate copy of the issuance agreement; the issuer is required, pursuant to the the FSC acts and regulations of the country for 3. A duplicate copy of the deposit contract and where the stocks are issued, to recordatio custody contract (if the bonds are convertible provide or disclose, shall also be filed n after or have warrants for the purchase of overseas with the FSC within three days after issuance depositary receipts); such provision. of the overseas depositar 4. A duplicate copy of the paying agency y receipts agreement; 5. A duplicate copy of the purchase agreement;

6. A duplicate copy of the trust deed;

7. An opinion letter in Chinese issued by an ROC attorney-at-law confirming that there is no material discrepancy between the issuance rules for the overseas corporate bonds and the particulars of the issuance as set forth in a registration that the FSC has allowed to become effective, or in an application that the FSC has approved;

8. Documentary evidence providing proof of deposit of funds collected in full;

9. A list of those whose subscriptions account for 10 percent or more of the total value of the Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

issue as well as the individual subscription prices and quantities thereof;

10.other items as specified by the FSC. ｃ. The A Statement of Outstanding Overseas Corporate After the issuance, the sponsor shall None Article 28-1 of “Regulations documents, Bonds post separately, both by the 20th day Governing the Offering and Issuance the issuer and within five days after the end of of Overseas Securities by Issuers.” shall each month, to the information submit to reporting website specified by the the FSC for FSC, and shall also submit a report to recordation the competent authority for foreign monthly; exchange business for recordation ｄ. The Instances of warrant exercise by overseas After conversion of the overseas None Article 28-2 of “Regulations documents, investors corporate bonds or exercise of the Governing the Offering and Issuance the warrants is accepted by an issuer, the of Overseas Securities by Issuers.” overseas issuer shall, within ten days after investor completion of a cash capital increase shall through a new share issue, report any submit to instances of warrant exercise by the FSC for overseas investors to the Investment recordation Commission of the Ministry of . Economic Affairs. Ⅲ Overseas 1. Where the offering is to raise funds; 1.Where the offering is to raise funds, None Article 34 of “Regulations Governing stocks a public announcement of the the Offering and Issuance of Overseas  Number of shares issued, issue price per following particulars shall be made Securities by Issuers.” ａ.basic share, total issue size, and projected date of within two days after the issue information issuance; pricing; 2.Where the offering is not for the  Place of issuance and transaction; purpose of raising funds, a public announcement of the following If the statement of issuance methods provides particulars shall be made within two that a portion of the depositary receipts shall days after listing, be subscribed to by specific person(s), then the announcement shall state the purpose for Should there be any change after the subscription by the specific person(s) announcement or reporting of items through negotiation, the total number of referred to in subparagraph 1 of the shares subscribed to by the specific preceding paragraph, a public person(s), the total dollar amount, and the announcement of such change shall be Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

relationship between the specific person(s) made and a report shall be filed with and the issuer; the FSC within two days after the closing of the offering. the funds utilization plan and the expected benefits thereof (in the case of cash capital increase through a new share issue);

The main impact on shareholders' equity (such as expenses incurred through issuance of overseas stocks, or impact on shareholding structure).

2. Where the offering is not for the purpose of raising funds;

Number of shares listed, listed price per share, and total size of listing;

Place of listing;

The main impact on shareholders' equity (such as expenses incurred through issuance, or impact on shareholding structure).

ｂ.The 1.a prospectus prepared in accordance with the The issuer shall submit the documents None Article 35 of “Regulations Governing documents, securities acts of the country where the stocks mentioned to the FSC within ten days the Offering and Issuance of Overseas the issuer are issued; provided, however, that these after issuance or listing; Any Securities by Issuers.” shall submit requirements do not apply to cases where the information that the issuer is required, to the FSC shares have not been issued for the purpose of pursuant to the acts and regulations of for raising capital; the country where the stocks are recordation issued, to provide or disclose, shall after also be filed with the FSC within issuance of 2.a duplicate copy of the overseas stock service three days after such provision. the overseas agency agreement; stocks. Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

3.a duplicate copy of the custody contract;

4.an opinion letter in Chinese issued by an ROC attorney-at-law confirming that there is no material discrepancy between the issuance rules for the overseas stock issuance and the particulars of the issuance as set forth in a registration that the FSC has allowed to become effective, or in an application that the FSC has approved;

5.documentary evidence providing proof of deposit of funds collected in full;

6.a list of those whose subscriptions account for 10 percent or more of the total value of the issue as well as the individual subscription prices and quantities.

7.other documents required by the FSC. c.The a Statement of Outstanding Balance of Overseas After the issuance of overseas stocks, None Article 36-1of “Regulations Governing documents, Stocks the issuer shall, both by the 20th day the Offering and Issuance of the issuer and within five days after the end of Overseas Securities by Issuers.” shall submit each month, post to the information to the FSC reporting website specified by the for FSC, and shall further report such recordation issuance to the competent authority monthly; for foreign exchange business. d.The The number of stocks issued and the total dollar In the event that the issuer carries out None Article 36-2 of “Regulations documents, amount a cash capital increase through an Governing the Offering and Issuance the issuer additional share issue, a new share of Overseas Securities by Issuers.” carries out a distribution from earnings, or a new cash capital share distribution from capital reserve increase the pursuant to Article 31, paragraph 1, issuer shall subparagraph 2, the issuer shall, post. within two days after issuance thereof, report to the competent authority for foreign exchange Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing business the number of stocks issued and the total dollar amount and post the relevant information to the information reporting website specified by the FSC ＊ Ask the original primary underwriter of a Within a year after registration of None 1.Securities and Futures Commission, （9）Implement company surviving in consequence of a merger merger or target company's, TSE- Ministry of Finance (1) Document ation status of or target company’s to submit assessment listed or GTSM- listed companies No.04783, December 22, 1999 merger or target opinions regarding the impact on the company’s must input report in MOPS in ten company’s finances, operation and stockholder equity and if days after the end of each quarter. 2. Securities and Futures Commission, benefits merger or target company's benefits come true. Ministry of Finance (1) Document No.0910003639, June 28, 2002

3. Article 9,Paragraph1, Subparagraph8 of “Regulations Governing the Handling Offering and Issuance of Securities by Securities Issuers.”

4 Articles 11,Paragraph1, Subparagraph5 of “Regulations Governing the Handling Offering and Issuance of Overseas Securities by Securities Issuers.”

(10) Employee stock None Article 59 of “Criteria Governing options 1. Make public announcement for the main 1. On the day next following the the Offering and Issuance of Securities by Securities Issuers” content of the requirements for issuance and arrival of the notification of subscription. effective reporting, make public 2. Input the status of the issuance announcement for the main 3. Where the issuer executes its contractual content of the requirements for obligations using already issued shares, issuance and subscription. If publicly announce the cost of the shares performance of contract is Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing which it anticipates to obtain, the conducted by means of issuance difference between the price of the of new shares, any possibility of employee stock options and the company's dilution of the shareholders' cost of obtaining the shares, and any rights and interests shall also be effects on the shareholders' rights and publicly announced. interests. 2. After the application takes effect, input the status of the issuance into the website specified by the FSC for reporting of information on the day following the issuance or the expiry of the issuance period. 3. Where the issuer executes its contractual obligations using already issued shares, once the application with the FSC takes effect, the issuer shall, within two days of a directors' meeting resolving that the company shall repurchase its own shares for use as employee stock options as part Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing of the execution of its contraction obligations, publicly announce the cost of the shares which it anticipates to obtain, the difference between the price of the employee stock options and the company's cost of obtaining the shares, and any effects on the shareholders' rights and interests.

4. Any change in the main content regarding the terms and conditions of the issuance as referred to in Paragraph 1 shall be made only after being approved by the majority votes in a meeting of Board of Directors at which two- thirds (2/3) or more directors are present, and public announcement shall be made after the minutes of the meeting of the Board of Director and relevant materials regarding the amendment have been submitted to the FSC for recordation 3 Private placement For further information, please refer to 1 Report after TSE-listed and GTSM- None. 1.Paragraph 5 of Article 43-6 of the Securities and Futures Commission, Ministry of listed companies should input Securities and Exchange Law. Finance (1) Document No.112794, April 3, Private placements information into 2002and Securities and Futures Commission, MPOS within 2 days after the date Ministry of Finance (1) Document of mailing of the shareholders 2. Securities and Futures Commission, No.091000539, October 24, 2002 and Financial meeting notice. and in cases of the Ministry of Finance (1) Document Supervisory Securities (1) Document No. offerees who have already been No.176305, December 25, 2001 0940004469of October 11, 2005 arranged, within 2 days after the Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing date of arranged date, and 2 days after the issue pricing, and the share payments or payments of the price 3. Securities and Futures Commission, of the corporate bonds or other Ministry of Finance (1) Document securities have been made in full No.112794, April 3, 2002 within 10 days after the end of each quarter. 4. Securities and Futures Commission, Ministry of Finance (1) Document ２ Within 15 days of the date the No.0910003639, June 28, 2002 share payments or payments of the price of the corporate bonds or other 5. Securities and Futures Commission, securities have been made in full, Ministry of Finance (1) Document the company shall input relevant No.0910005390, October 24, 2002 information to MOPS. A company carrying out private placement of overseas securities must submit the 6.Securities and Futures Commission, report regarding such information Ministry of Finance (1) Document input into MOPS to the competent No.0920001991, May 8,2003 authorities in charge of foreign exchange services. 7. Securities and Futures Commission, Ministry of Finance (1) Document ３ A company carrying out private No.0920001992, may 8,2003 placement of bonds must input information regarding the balance of ８ .Financial Supervisory Securities (1) bonds to MOPS prior to the tenth Document No. 0940004469of day of each month. A company October 11, 2005. carrying out private placement of overseas securities must submit the report regarding the information input into MOPS to the competent authorities in charge of foreign exchange services. 4 Acquisition or For further information, please refer to 1 Must input relevant information into None 1 Article 36-1 of Securities and disposal of “Guidelines for Handling Acquisition and MOPS within two days of the date Exchange Law. assets. Disposal of Assets by Public Companies” after the occurrence. 2 Securities and Futures Commission, 2 Companies participating in merger, Ministry of Finance (I) Document (Including acquisition or disposal of target companies, and acquisition No.0910003639 of June 28, 2002. of shares of another company must important securities, real estate, other have the approval of the FSC in advance if they cannot hold board 3 “Guidelines for Handling Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

meetings on the same day or hold Acquisition and Disposal of Assets fixed assets and intangible assets, shareholders meetings on the same by Public Companies” derivative instrument transaction, merger, day. target company’s, issuance of new shares due to acquisition of the shares of another company, and investment in mainland China)

5. Endorsement and For further information, please refer to "The Must input relevant information into None 1 Article 36-1 of Securities and Guarantee Guidelines for the Lending of Capital, MOPS within two days of the date after Exchange Law. Endorsements and Guarantees by Public the occurrence Companies" 2 "The Guidelines for the Lending of Capital, Endorsements and Guarantees by Public Companies"

3 Securities and Futures Commission, Ministry of Finance (I) Document No.0910003639 of June 28, 2002. 6. Capital lending Ditto Ditto None 1 Article 36-1 of Securities and Exchange Law.

2 "The Guidelines for the Lending of Capital, Endorsements and Guarantees by Public Companies"

3 Securities and Futures Commission, Ministry of Finance (I) Document No.0910003639 of June 28, 2002. 7Basic company A company conducting initial public None 1.Notice accompanying letter from the information offering must input relevant Commission notifying company of . information to MOPS after effective Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing registration or any changes regarding effective registration. basic information 2. Securities and Futures Commission, Ministry of Finance (I) Document No.0910003639 of June 28, 2002. 8 Financial 1 Financial forecast. A. Announcements and reports within ＊1 Taiwan Stock 1 Securities and Futures Commission, forecasts. two days。 Exchange. Ministry of Finance (6) Document 2 Case checklists. No.02435 of April 9, 1997. B. A public company that must publish ＊2 GreTai Securities a complete financial forecast Market. 2. Securities and Futures Commission, 3 Minutes of board meeting. because of a circumstance under Ministry of Finance (6) Document Article 6 of Regulations Governing No.005847 of Oct.26, 2001. Publication of Financial Forecasts 3.4 Securities and of Public Companies shall publicly Futures Institute announce and report within 10 days 3. Securities and Futures Commission, from the date it receives the notice Ministry of Finance (I) Document to prepare the report. No.0910003639of June 28, 2002. 4. Securities and Futures Commission, C. When a summary financial forecast Ministry of Finance (6) document is corrected or updated must be No.0910005765 of November announced and reported. 14,2002. D. When a financial forecast is corrected 、updated or re-prepared, 5. Securities and Futures Commission, the portions of the original forecast Ministry of Finance (6) Document that cannot be used and their No.0910005771 of November impact must be announced and 14,2002. reported within two days of the date of their discovery, and a 6.Securities and Futures Commission, corrected 、updated or re-prepared Ministry of Finance (6) Document forecast must be announced and No.0910006093 of December 9, reported within ten days of the date 2002. of discovery. 7.Securities and Futures Commission, Ministry of Finance (6) Document E. When a complete financial forecast No. 0920000765 of February 11, shall re-prepared ， but the basic 2003. 8.Financial Supervisory Securities (6) Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

Document No. 0930005938of assumptions for the financial December 9, 2004. forecast did not change materially ， the management level of the company must input information about the basic assumptions are effective into the MOPS within ten days of the date of occurrence, and, if the financial forecast was reviewed by a CPA, also shall input into a CPA’s opinion.

9.Change of 1 Application (containing reasons for and An application must be made to the *1 Taiwan Stock Article 6 of “Guideline Governing the accounting theoretical basis of change in accounting Commission at the end of the year Exchange. Preparation of Financial Reports by principles principles, specific evidence of superiority of prior to the planned change of Securities Issuers.” new accounting principles, and cumulative accounting principles. *2 GreTai Securities （1） Approval of impact number of change of accounting Market. application principles), follow-up audit opinions of CPA. *3 Chinese Securities 2 Minutes of board meeting. Association.

4 Securities and Futures Institute （2）announcement 1 the cumulative impact figures of accounting Must input relevant information into None Article 6 of “Guideline Governing the after The principle changes, the Market Observation Post System Preparation of Financial Reports by Commission has (MOPS) after receiving notification of Securities Issuers.” approved the approval from this Commission application 2 follow-up audit opinions of CPA Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

(3) Reporting and 1Cumulative impact figures of accounting Unless it is not possible to calculate Article 6of “Guideline Governing the announcing principle changes. the cumulative impact figures of Preparation of Financial Reports by of accounting principle changes, the Securities Issuers.” cumulative actual cumulative impact figures of *1 Taiwan Stock impact ２ Analysis of the reason for the the change of accounting principles Exchange. figures. difference and CPA’s opinion if the must be calculated and reported to this difference between the actual commission after submission to board *2 GreTai Securities cumulative effect of a change in of directors within two months after Market. accounting principles and the original the beginning of the fiscal year in estimated cumulative effect of a change which the new accounting principles in accounting principles is $10 million are adopted. If the difference *3 Chinese Securities New Taiwan Dollars (NTD) or more, Association. and if the amount is also one percent or between the actual cumulative more of net operating revenues for the effect of a change in accounting previous year or more than five percent principles and the original 4 Securities and Futures estimated cumulative effect of a Institute of total paid-in capital. change in accounting principles is $10 million New Taiwan Dollars (NTD) or more, and if the amount is also one percent or more of net operating revenues for the previous year or more than five percent of total paid-in capital, The analysis and the attesting CPA's opinion shall be publicly announced and reported to the FSC. ＃10 Accounting 1 Application (containing reason for and An application must be made to the *1 Taiwan Stock Article 6 of “Guideline Governing the estimate theoretical basis of accounting estimate Commission at the end of the year Exchange. Preparation of Financial Reports by changes changes and specific evidence of superiority prior to the planned adoption of new Securities Issuers.” (changes in of new accounting estimates), and reviewing accounting estimates. service life of opinions of CPA. *2 GreTai Securities depreciable and Market. depletable assets, and in 2 Minutes of board meeting. *3 Chinese Securities periods Association benefited by effective period 4 Securities and Futures Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing of intangible assets). Institute. （1） Approval of application （2）announcement 1 the impact figures of accounting principle Must input relevant information into None Article 6 of “Guideline Governing the after The changes, the Market Observation Post System Preparation of Financial Reports by Commission (MOPS) after receiving notification of Securities Issuers.” has approved approval from this Commission the application 2 follow-up audit opinions of CPA

11. Reporting of In accordance with Article 28-2-1 of the None repurchase of Securities and Exchange Law, a TSE-listed or 1. The company must make an 1 Article 28-2 of Securities and company shares GTSM- listed company may, with the consent of by a TSE-listed at least one-half of all directors when at least announcement and report to this Exchange Law. or GTSM- listed two-thirds of the board is in attendance, may company. repurchase its shares on a centralized exchange commission within two days of market or an over-the-counter market for the 2 Article 2 of “Regulations Governing purpose of transferring shares to employees, board resolution. Repurchase of Company Shares by a converting equity, or maintaining the company’s TSE-listed or GTSM- listed credibility and stockholders equity. 2. Please download the relevant Company.” reporting form from the Commission’s website. (www.sfb.gov.tw)

12.Reporting before 1.Before change to share ownership of the The company should transfer the None 1.Article 22-2 of the Securities and transferring stocks company’s board directors, supervisors, report to Market Observation Post Exchange Law managers, and shareholders holding System before 17:30 daily. 10percent or more of the company’s stocks, 2.Securities and Futures Commission, they should report to the TSE or OTC, and Ministry of Finance (3) Document send the same report to the company. No.0910003657, July 1,2002

2.The company should transfer the report to 【 Relevant filing forms can be Market Observation Post System at the same downloaded from the Securities and time after receiving the report. Futures Commission Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

website（www.sfb.gov.tw）】

13. Report after TSE- Each time that the accumulative number of None listed or GTSM- shares repurchased accounts for at least two 1 Each time that the accumulative 1 Article 28-2 of Securities and listed companies percent of the shares issued by the company or repurchased the accumulative value of shares repurchased number of shares repurchased Exchange Law. accounts for at amounts to at least NT$300 million, the least two percent company shall, within two days, make an accounts for at least two percent of of the shares, or announcement of the date, number, type, and 2 Article 3 of “Regulations Governing accumulative price of the shares, and report the same to the the shares issued by the company or Repurchase of Company Shares by a value of shares Commission. TSE-listed or GTSM- listed repurchased the accumulative value of shares Company.” amounts to at least NT$300 repurchased amounts to at least million NT$300 million, the company shall, within two days, make an announcement of the date, number, type, and price of the shares, and report the same to the Commission.

2Please download the relevant reporting form from the Commission’s website. (www.sfb.gov.tw) 14. Report after TSE- Company completes repurchase of company None listed and shares or repurchase period ends 1.The company must make an 1 Article 28-2 of Securities and GTSM-listed companies announcement and report to the Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing completes repurchase of Commission within five days at Exchange Law. company shares or repurchase the end of repurchase period or the period ends. 2 Article 5 of “Regulations Governing completion of repurchase. Repurchase of Company Shares by a TSE-listed or GTSM- listed Company.” 2. Please download the relevant reporting form from the Commission’s website. (www.sfb.gov.tw) 15. Report of change in A company may, with the consent of at least A company may report to the None original objective one-half of all directors when at least two-thirds Commission a change in the original 1Article 28-2 of Securities and of stock of the board is in attendance, may change the objective of a stock repurchase within repurchases. original objective of a stock repurchase. two months after the day on which the Exchange Law. company’s previously reported company share repurchase period 2 Article 2 of “Regulations Governing ended. Repurchase of Company Shares by a TSE-listed or GTSM- listed Company.” 16. Prospectus Prospectus（include issuance of overseas 1.The draft prospectus shall be posted, ＊1 Taiwan Stock 1.Article 30 of Securities and Exchange securities） as an electronic file in the format Exchange. Law. prescribed by the FSC, to the information reporting website specified by the FSC and, within ＊2 GreTai Securities 2. Article 6 of “Regulations Governing thirty (30) days from the date of Market. the Handling Offering and Issuance effective registration or receipt of of Securities by Securities Issuers.” the FSC's approval notice, the final 3 Chinese Securities amended/revised prospectus shall be Association. 3.Criteria Governing Information to be shall be posted, as an electronic file Published in Public Offering and in the format prescribed by the FSC, Issuance Prospectuses. to the information reporting website 4 Securities and Futures specified by the FSC. Institute 4. Securities and Futures Commission, Ministry of Finance (1) Document 2.Prospectus prepared in accordance No. 0910003639, June 28, 2003 with the securities laws of the country where the offering and issuance of overseas securities ５ Article19 、 27and36 of “Criteria consists of overseas depositary Governing the Handling Offering and receipts and issuance of overseas Issuance of Overseas Securities by Securities Issuers.” Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

corporate bonds, overseas stocks took place shall Input information into the MOPS within ten days after issuance of the overseas securities.

17.The public company Public Companies conduct public tender offer 1.Any public tender offer to purchase 1.Securities Association 1.Paragraph 2 of Article 43-1 of the is the offerer and according to Regulations Governing Tender the securities of a public company Securities and Exchange law conduct public Offers for Purchase of the Securities of a Public shall not be made until after a 2.The Securities and tender offer or Company report has been filed with the FSC Futures Institution. 2.Article7 and Article 26 of the competitive public and a public announcement made. Regulations Governing Tender Offers tender offer for Purchase of the Securities of a 2.For any competitive public tender 3.TSE or Gretai Public Company ，and the Financial offer for securities issued by the Securities Market. Supervisory Commission same public company, a report of (3)Document No.0940002714 of June public tender offer shall be filed 4.The Taiwan Securities 22, 2005. with the FSC and a public Depository announcement made at least five Company. trading days prior to the expiry date of the original public tender offer period. 5 The public company whose the securities are being acquired 18.The public company The public company whose the securities are Within seven days after its receipt of 1.Securities Association 1.Paragraph 4 of Article 43-1 of the whose the being acquired shall, within seven days after its the Public Tender Offer Report Form Securities and Exchange law securities are receipt of the Public Tender Offer Report Form delivered by the Offerer. 2.The Securities and being acquired delivered to it by the Offerer shall report related Futures Institution. 2.Article 14 and Article 26 of the items in writing to the FSC Regulations Governing Tender Offers 3.TSE or Gretai for Purchase of the Securities of a Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing

Securities Market. Public Company

4.The Taiwan Securities Depository Company. 19.The public company An Offerer buying back its own shares in Before the commencement date of the Bureau of monetary 1.Paragraph 4 of Article 43-1 of the is the Offerer accordance with Article 28-2 of the Securities public tender offer period. affairs(suitable for Securities and Exchange law buying back its and Exchange Law financial holding 、 、 own shares. company bank bill 2.Article 10 and Article 26 of the financial company) or Regulations Governing Tender Offers Insurance Bureau For Purchase of the Securities of a (suitable for insurance Public Company ，and the Financial company) Supervisory Commission (3)Document No.0940002714 of June 22, 2005. 20.The public company The public company is the Offerer and Make Before making any modifications to 1.Offeree. 1.Paragraph 4 of Article 43-1 of the is the Offerer and modifications to conditions in Public Tender conditions. Securities and Exchange law make Offer modifications to 2.The appointed conditions in institution takes 2.Article 17 and Article 26 of the Public Tender deposit of securities Regulations Governing Tender Offers Offer for Purchase of the Securities of a 3.The public company Public Company whose the securities are being acquired 21.The public company The termination of a public tender offer When termination of a public tender 1.Offeree. 1.Paragraph 4 of Article 43-1 of the is the Offerer and proceeding is approved by the FSC offer proceeding is approved by the Securities and Exchange law terminate a public FSC, public announcement shall be 2.The appointed tender offer made within two (2) days of receiving institution takes 2.Article 21 and Article 26 of the FSC approval. deposit of securities Regulations Governing Tender Offers for Purchase of the Securities of a 3.The public company Public Company whose the securities are being acquired 22. The public Before the expiration of the period, the acquired When the condition of the public The appointed 1.Paragraph 4 of Article 43-1 of the company is the securities has reached the minimum volume of tender offer’ has been accomplished, institution takes deposit Securities and Exchange law Offerer and the the public tender offer the public announcement should be of securities public tender made immediately 2.Article 19 and Article 26 of the offer’s condition Regulations Governing Tender Offers Items to be Summary of contents Deadline for public announcement or Agencies to which Legal basis announced publicly filing copies should be sent or filing has been accomplished for Purchase of the Securities of a Public Company 23.The public company The public company is the Offerer and the Within two (2) days from the public Informing the Offeree 1.Paragraph 4 of Article 43-1 of the is the Offerer and public tender offer period’s expires. tender offer period’s expiration date. on the date of reporting Securities and Exchange law the public tender to the FSC and publicly offer period’s announcement. 2.Article 21 and Article 26 of the expires Regulations Governing Tender Offers for Purchase of the Securities of a Public Company

Notes:

1.“*” Indicates that a publicly-held company whose stock is not yet listed on TSE or GTSM is temporarily exempt from this requirement; and unless there is a specific note, a company whose stock is traded in the Emerging Market is also temporarily exempt from this requirement.

2.“＃” indicates that companies are not required to upload these materials to this institute’s website (http://sii.tse.com.tw/).

3.When a publicly-held company makes a public announcement, it must input relevant information into the Market Observation Post System (MOPS)。（ http://sii.tse.com.tw/）

4.According to Regulations Governing the Handling Offering and Issuance of Securities by Securities Issuers， the prospectus prepared for the registration (application) for public offer and/or issue of securities shall transmit it to the MOPS in electronic file format and get the approved notice from Taiwan Stock Exchange.

5.When a publicly-held company makes a public announcement into the Market Observation Post System, except where specified below , no copy need to be sent ：

A. Report the below listed items to the Financial Supervisory Commission (FSC): (1) Report of stock repurchase ： including basic information, criteria, period ends, and transferring stock.

(2) Financial reports(including yearly financial reports, half - yearly financial report, Q1, Q3 financial report) and financial forecasts.

B. Agencies to which copies should be sent:

(1) Financial reports (including yearly financial reports, half - yearly financial report, Q1, Q3 financial report) and financial forecasts: copies sent to the Securities and Futures Institute. Listed company must submitted copies to Taiwan Stock Exchange, and company whose shares are traded in the business places of securities firms must submitted copies to GreTai Securities Market.

(2) Annual report: copies sent to the Securities and Futures Institute and Chinese Securities Association. Listed company must submitted copies to Taiwan Stock Exchange, and company whose shares are traded in the business places of securities firms must submitted copies to GreTai Securities Market.

(3) Prospectus: copies sent to the Securities and Futures Institute and Chinese Securities Association. Listed company must submitted copies to Taiwan Stock Exchange; and company whose shares are traded in the business places of securities firms must submitted copies to GreTai Securities Market.

6.If a company making a public offering is a futures dealer (including companies that deal in futures among other service items), announcements must also be sent to the Chinese National Futures Association and the Taiwan Futures Exchange.

7.Securities and futures dealers shall comply with any specific regulations applicable to their types of business.

Appendix II List of Short-Swing Profit Disgorgement Against Insiders (1994-2005) Year No. of Total Cases Accrued Disgorged Amount No. of Disgorged Cases Realized Disgorged Amount

1994* 84 80,270,024 84 77,717,537

1995 186 83,820,842 186 73,178,590

1996 215 172,609,117 215 153,304,443

1997 420 265,702,636 418 169,081,856

1998 353 986,116,196 342 111,296,617

1999 416 224,869,824 415 176,178,874

2000 441 233,376,966 433 173,966,590

2001 321 83,974,981 316 82,212,818

2002 351 106,453,696 337 102,272,653

2003 501 45,722,496 474 35,973,078

2004 634 85,406,589 582 63,926,699

2005 358 44,380,418 351 41,711,342

Total 4,280 2,412,495,762 4,238 1,301,702,120

1. 1994*(1994/06-1994/12) 2. Source: Securities and Futures Investors Protection Center, http://www.sfipc.org.tw/english/main.aspx, March 2007.